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OF 



POLITICAL ECONOMY 



CONSIDERED 



WITH A VIEW TO THEIR PRACTICAL 



APPLICATION. 



By the Rev. T. R. MALTHUS, M.A. F.R.S. 

FRQIESSOR OF HISTORY AND POLITICAL ECONOMY IN #HE 



EAST INDIA COLLEGE, HERTFORDSHIRE. 




^BOSTON": 

WELLS AND LILLY — COURT-STREET. 
♦♦•♦«♦ 

1821. 



K\ 




tf 



9k v«*v 



3 



PRINCIPLES 1 



OP 



POLITICAL ECONOMY. 



CONTENTS 



Pige 

INTRODUCTION ■„ . . . 1 

CHAPTER I. 

OH THE DEFINITIONS OF WEALTH AND PRODUCTIVE LABOUR. 

Sect. I.— On the Definitions of Wealth 20 

Sect. II. — On Productive and Unproductive Labour . . 23 

CHAPTER II. 

ON THE NATURE AND MEASURES OF VALUE. 

Sect. I. — Of the different Sorts of Value . . 40 

Sect. II. — Of Demand and Supply, as they effect Exchange- 
able Value 50 

Sect. III. — Of the Cost of Production as it effects Exchange- 
able Value 57 

Sect. IV. — Of the Labour which a Commodity has cost, con- 
sidered as a Measure of Exchangeable Value . 67 

Sect. V. — Of Money, when uniform in its Cost, considered 
as a Measure of Value 86 

Sect. VI. — Of the Labour which a Commodity will com- 
mand, considered as a Measure of real Value in Exchange 94 

Sect. VII. — Of a Mean between Corn and Labour considered 
as a Measure of real Value in Exchange . . 100 



Vl CONTENTS, 

CHAPTER III. 

Or THE RENT OF LAND. 

Sect. I —Of the Nature and Causes of Rent . . 106 

Sect. II. — On the necessary Separation of the Rent of 
Land from the Profits of the Cultivator and the Wages 
of the Labourer . . . • • « .118 

Sect. III. — Of the Causes which tend to raise Rents in 
the ordinary Progress of Society . . . .126 

Sect. IV.— Of the Causes which tend to lower Rents . 140 

Sect. V. On the Dependence of the actual Quantity of 

Produce, obtained from the Land, upon the existing Rents 
and the existing Prices 143 

Sect, VI.— Of the Connexion between great comparative 
Wealth and a high comparative Price of raw Produce . 150 

Sect. VII.— On the Causes which may mislead the Land- 
lord in letting his Lands to the Injury both of himself and 
the Country * 5g 

Sect. VIII —On the strict and necessary Connexion of the 
Interests of the Landlord and of the State in a Country 
which supports its own Population .... 160 

Sect. IX. — On the Connexion of the Interests of thcLand- 
lord and of the State, in Countries which import Corn . 170 

Sect. X.— General Remarks on the Surplus Produce of the 
Land • 



176 



CHAPTER IV. 

OF THE WAGES OF LABOUR. 

Sect. I.— Of the Dependance of the Wages of Labour upon 
Supply and Demand 187 

Sect. II.— Of the Causes which principally affect the Hab- 
its of the Labouring Classes . . • • .192 

Sect. III.— Of the Causes which principally influence the 
demand for Labour and the Increase of the Population 200 

Sect. IV.— Of the Effect of a Fall in the Value of Money 
on the Demand for Labour and the Condition of the 
Labourer . ' 207 



CONTENTS. vii 

Page 

Sect. V. — On the Conclusions to be drawn from the pre- 
ceding Review. — Of the Prices of Corn and Labour 
during the Five last Centuries 218 

CHAPTER V. 

OF THE PROFITS OF CAPITAL. 

Sect. I. — Of Profits as affected by the increasing Difficulty 
of procuring the Means of Subsistence . ... 228 

Sect. II. — Of Profits as affected by the Proportion which 
Capital bears to Labour ...... 234 

Sect. III. — Of Profits as affected by the Causes practically 
in operation ........ 243 

Sect. IV. —Remarks on Mr. Ricardo's Theory of Profits . 254 

CHAPTER VI. 

OF THE DISTINCTION BETWEEN WEALTH AND VALUE. . . . 262 

CHAPTER VII. 

ON THE IMMEDIATE CAUSES OF THE; PROGRESS OF WEALTH, 

Sect- I. — Statement of the particular Object of Inquiry . 268 

Sect. II. — Of the Increase of Population considered as a 
Stimulus to the continued Increase of Wealth . . 270 

Sect. III. — Of Accumulation, or the Saving from Revenue 
to add to Capital, considered as a Stimulus to the Increase 
ofWealth 273 

Sect. IV. — Of the Fertility of the Soil, considered as a Sti- 
mulus to the continued Increase of Wealth . . .291 

Sect. V. — Of Inventions to save Labour, considered as a 
Stimulus to the continued Increase ofWealth . .311 

Sect. VI. — Of the Necessity of a Union of the Powers of 
Production with the Means of Distribution, in order to 
ensure a continued Increase ofWealth . . . 320 

Sect. VII. — Of the Distribution occasioned by the Division 
of landed Property, considered as the Means of increasing 
th« exchangeable Value of the whole Produce . . 330 



viii CONTENTS. 

Sect. VIII. — Of the Distribution occasioned by Commerce, 
internal and external, considered as the Means of increas- 
ing the exchangeable Value of Produce . . . 340 

Sect. IX. — Of the Distribution occasioned by unproductive 
Consumers, considered as the Means of increasing the ex- 
changeable Value of the whole Produce . . . 358 

Sect. X — Application of some of the preceding Principles 
to the Distresses of the Labouring Classes since 1815, 
with General Observations 379 

Summary . . ...... 405 

Index 465 



/' 



PRINCIPLES 



OF 



POLITICAL ECONOMY 



INTRODUCTION. 



It has been said, and perhaps with truth, that the 
conclusions of Political Economy partake more of 
the certainty of the stricter sciences than those of 
most of the other branches of human knowledge. 
Yet we should fall into a serious error if we were to 
suppose that any propositions, the practical results of 
which depend upon the agency of so variable a being 
as man, and the qualities of so variable a compound 
as the soil, can ever admit of the same kinds of proof, 
or lead to the same certain conclusions, as those 
which relate to figure and number. There are in- 
deed in political economy great general principles, to 
which exceptions are of the most rare occurrence, 
and prominent land-marks which may almost always 
be depended upon as safe guides ; but even these, 
when examined, will be found to resemble, in most 
particulars, the great general rules in morals and poli- 
tics founded upon the known passions and propensi- 
ties of human nature : and whether we advert to the 
qualities of man, or of the earth he is destined to cul- 
tivate, we shall be compelled to acknowledge, that the 
science of political economy bears a nearer resem- 

1 



2 INTRODUCTION. 

blance to the science of morals and politics than to 
that of mathematics. 

This conclusion, which could hardly fail to be 
formed merely from a view of the subjects about 
which political economy is conversant, is further 
strengthened by the differences of opinion which 
have prevailed among those who have directed a 
large share of talent and attention to this study. 

During the prevalence of the mercantile system, 
the interest which the subject excited was confined, 
almost exclusively, to those who were engaged in the 
details of commerce, or expected immediate benefit 
from its results. The differences which prevailed 
among merchants and statesmen, which were diffe- 
rences rather in practice than principle, were not cal- 
culated to attract much attention. But no sooner 
was the subject raised into a science by the works of 
the Economists and of Adam Smith, than a memora- 
ble schism divided, for a considerable time, the stu- 
dents of this new branch of knowledge, on the funda- 
mental questions— What is wealth ? and from what 
source or sources is it derived ? 

Happily for the interests of the science and its use- 
fulness to society, the Economists and Adam Smith 
entirely agreed on some of those great general princi- 
ples which lead to the most important practical con- 
clusions ; such as the freedom of trade, and the leav- 
ing every person, while he adheres to the rules of 
justice, to pursue his own interest his own way, to- 
gether with some others : and unquestionably their 
agreement on these principles affords the strongest 
presumption of their truth. Yet the differences of 
the Economists and Adam Smith were not mere dif- 
ferences in theory ; they were not different interpre- 
tations of the same phenomena, which would have 
no influence on practice; but they involved such 
views of the nature and origin of wealth, as, if adopt- 
ed, would lead, in almost every country, to great 



INTRODUCTION; 



practical changes, particularly on the very important 
subject of taxation. 

Since the sera of these distinguished writers, the 
subject has gradually attracted the attention of a 
greater number of persons, particularly during the 
last twenty or thirty years. All the main proposi- 
tions of the science have been examined, and the 
events which have since occurred, tending either to 
illustrate or confute them, have been repeatedly dis- 
cussed. The result of this examination and discus- 
sion seems to be, that on some very important points 
there are still great differences of opinion. Among 
these, perhaps, may be reckoned — The definitions of 
wealth and of productive labour — The nature and 
measures of value — The nature and extent of the 
principles of demand and supply— The origin and 
progress of rent — The causes which determine the 
wages of labour and the profits of stock — The causes 
which practically retard and limit the progress of 
wealth — The level of the precious metals in different 
countries — The principles of taxation, &x. On all 
these points, and many others among the numerous 
subjects which belong to political economy, differen- 
ces have prevailed among persons whose opinions are 
entitled to attention. Some of these questions are to 
a certain degree theoretical ; and the solution of them, 
though obviously necessary to the improvement of 
the science, might not essentially affect its practical 
rules ; but others are of such a nature, that the deter- 
mination of them one way or the other will necessa- 
rily influence the conduct both of individuals and of 
governments ; and their correct determination there- 
fore must be a matter of the highest practical im- 
portance. 

In a science such as that of political economy, it is 
not to be expected that an universal assent should be 
obtained to all its important propositions ; but, iii or- 
der to give them their proper weight and justify their 
being acted upon, it is extremely desirable, indeed 



4 INTRODUCTION. 

almost necessary, that a considerable majority of 
those who, from their attention to the subject, are 
considered by the public as likely to be the most com- 
petent judges, should agree in the truth of them. 

Among those writers who have treated the subject 
scientifically, there is not perhaps, at the present mo- 
ment, so general an agreement as would be desirable 
to give effect to their conclusions ; and the writers., 
who peculiarly call themselves practical, either draw 
no general inferences, or are so much influenced by 
narrow, partial, and sometimes interested views, that 
no reliance can be placed on them for the establish- 
ment of general rules. The last twenty or thirty 
years have besides been marked by a train of events 
of a most extraordinary kind ; and there has hardly 
yet been time so to arrange and examine them, as to 
see to what extent they confirm or invalidate the re- 
ceived principles of the science to which they relate. 

The present period, therefore, seems to be unpro- 
pitious to the publication of a new systematic treatise 
on political economy. The treatise which we al- 
ready possess is still of the very highest value ; and 
till a more general agreement shall be found to take 
place, both with respect to the controverted points of 
Adam Smith's work, and the nature and extent of 
the additions to it, which the more advanced stage of 
the science has rendered necessary, it is obviously 
more advisable that the different subjects which ad- 
mit of doubt should be treated separately. When 
these discussions have been for some time before the 
public, and a sufficient opportunity has been given, 
by the collision of different opinions and an appeal to 
experience, to separate what is true from what is 
false, the different parts may then be combined into a 
consistent whole, and may be expected to carry with 
it such weight and authority as to produce the most 
useful practical results. 

The principal cause of error, and of the differences 
which prevail at present among the scientific writers 



INTRODUCTION. 5 

on political economy, appears to me to be, a precipi- 
tate attempt to simplify and generalize ; and while 
their more practical opponents draw too hasty infe- 
rences from a frequent appeal to partial facts, these 
writers run into a contrary extreme, and do not suffi- 
ciently try their theories by a reference to that enlarg- 
ed and comprehensive experience which, on so com- 
plicated a subject, can alone establish their truth and 
utility. 

To minds of a certain cast there is nothing so cap- 
tivating as simplification and generalization. It is 
indeed the desirable and legitimate object of genuine 
philosophy, whenever it can be effected consistently 
with truth ; and for this very reason, the natural ten- 
dency towards it has, in almost every science with 
which we are acquainted, led to crude and premature 
theories. 

In political economy the desire to simplify has oc- 
casioned an unwillingness to acknowledge the ope- 
ration of more causes than one in the production of 
particular effects ; and if one cause would account for 
a considerable portion of a certain class of phenome- 
na, the whole has been ascribed to it without suffi- 
cient attention to the facts, which would not admit 
of being so solved. I have always thought that the 
late controversy on the bullion question presented a 
signal instance of this kind of error. Each party 
being possessed of a theory which would account for 
an unfavourable exchange, and an excess of the mar- 
ket price above the mint price of bullion, adhered to 
that single view of the question, which it had been 
accustomed to consider as correct ; and scarcely one 
writer seemed willing to admit of the operation of 
both theories, the combination of which, sometimes 
acting in conjunction and sometimes in opposition, 
could alone adequately account for the variable and 
complicated phenomena observable.* 

* It must be allowed, however, that the theory of the Bullionistg, though too ex- 
clusive, accounted for much the largest proportion of the phenomena in question ; 
and perhaps it may be said with truth that the Bullion Report itself was more free 
from the error 1 have adverted to, than any other work that appeared. 



6 INTRODUCTIONS. 

It is certain that we cannot too highly respect and 
venerate that admirable rule of Newton, not to admit 
more causes than are necessary to the solution of the 
phenomena we are considering ; but the rule itself im- 
plies, that those which really are necessary must be 
admitted. Before the shrine of truth, as discovered 
by facts and experience, the fairest theories and the 
most beautiful classifications must fall. The chemist 
of thirty years ago may be allowed to regret, that 
new discoveries in the science should disturb and 
confound his previous systems and arrangements ; but 
he is not entitled to the name of philosopher, if he 
does not give them up without a struggle, as soon as 
the experiments which refute them are fully estab- 
lished. 

The same tendency to simplify and generalize, 
produces a still greater disinclination to allow of mo- 
difications, limitations, and exceptions to any rule or 
proposition, than to admit the operation of more 
causes than one. Nothing indeed is so unsatisfactory, 
and gives so unscientific and unmasterly an air to a 
proposition, as to be obliged to make admissions of 
this kind ; yet there is no truth of which I feel a 
stronger conviction, than that there are many impor- 
tant propositions in political economy which absolute- 
ly require limitations and exceptions ,• and it may be 
confidently stated, that the frequent combination of 
complicated causes, the action and reaction of cause 
and effect on each other, and the necessity of limita- 
tions and exceptions in a considerable number of im- 
portant propositions, form the main difficulties of the 
science, and occasion those frequent mistakes which 
it must be allowed are made in the prediction of 

results. 

To explain myself by an instance. Adam Smith 
has stated, that capitals are increased by parsimony, 
that every frugal man is a public benefactor^* and 

* Wealth of Nations, Book II. c. iii. pp. 15-18. 6th edit. 



INTRODUCTION. 



that the increase of wealth depends upon the balance 
of produce above consumption.* That these pro- 
positions are true to a great extent is perfectly un- 
questionable. No considerable and continued in- 
crease of wealth could possibly take place without 
that degree of frugality which occasions, annually, 
the conversion of some revenue into capital, and 
creates a balance of produce above consumption ; but 
it is quite obvious that they are not true to an indefi- 
nite extent, and that the principle of saving, pushed 
to excess, would destroy the motive to production. 
If every person were satisfied with the simplest food, 
the poorest clothing, and the meanest houses, it is cer- 
tain that no other sort of food, cloathing, and lodging 
would be in existence ; and as there would be no ade- 
quate motive to the proprietors of land to cultivate 
well, not only the wealth derived from conveniences 
and luxuries would be quite at an end, but if the 
same divisions of land continued, the production of 
food would be prematurely checked, and population 
would come to a stand long before the soil had been 
well cultivated. If consumption exceed production, 
the capital of the country must be diminished, and its 
wealth must be gradually destroyed from its want of 
power to produce ; if production be in a great excess 
above consumption, the motive to accumulate and 
produce must cease from the want of will to con- 
sume. The two extremes are obvious ; and it fol- 
lows that there must be some intermediate point, 
though the resources of political economy may not be 
able to ascertain it, where, taking into consideration 
both the power to produce and the will to consume, 
the encouragement to the increase of wealth is the 
greatest. 

The division of landed property presents another 
obvious instance of the same kind. No person has 
ever for a moment doubted that the division of such 

* Book IV. c Hi. p. 250. 



i 
I 



& INTRODUCTION. 

immense tracts of land as were formerly in possession 
of the great feudal proprietors must be favourable to 
industry and production. It is equally difficult to 
doubt that a division of landed property may be car- 
ried to such an extent as to destroy all the benefits to 
be derived from the accumulation of capital and the 
division of labour, and to occasion the most extended 
poverty. There is here then a point, as well as in the 
other instance, though we may not know how to 
place it, where the division of property is best suited 
to the actual circumstances of the society, and calcu- 
lated to give the best stimulus to production and to 
the increase of wealth and population. It follows 
clearly that no general rule can be laid down, respect- 
ing the advantage to be derived from saving, or the 
division of property, without limitations and excep- 
tions ; and it is particularly worthy of attention that 
in cases of this kind, where the extremes are obvious 
and striking, but the most advantageous mean cannot 
be marked, that in the progress of society effects may 
be produced by an unnoticed approximation to this 
middle point, which are attributed to other causes, 
and lead to false conclusions. 

The tendency to premature generalization occa- 
sions also, in some of the principal writers on political 
economy, an unwillingness to bring their theories to 
the test of experience. I should be the last person to 
lay an undue stress upon isolated facts, or to think 
that a consistent theory, which would account for 
the great mass of phenomena observable, was imme- 
diately invalidated by a few discordant appearances, 
the reality and the bearings of which, there might not 
have been an opportunity of fully examining. But, 
certainly, no theory can have any pretension to be 
accepted as correct, which is inconsistent with gene- 
ral experience. Such inconsistency appears to me 
at once a full and sufficient reason for its rejection. 
Under such circumstances it must be either radically 
false, or essentially incomplete ; and in either case, 



INTRODUCTION. 9 

it can neither be adopted as a satisfactory solution of 
existing phenomena, nor acted upon with any degree 
of safety for the future. 

The first business of philosophy is to account for 
things as they are ; and till our theories will do this, 
they ought not to be the ground of any practical con- 
clusion. I should never have had that steady and 
unshaken confidence in the theory of population 
which I have invariably felt, if it had not appeared 
to me to be confirmed, in the most remarkable man- 
ner, by the state of society as it actually exists in 
every country with which we are acquainted. To 
this test I appealed in laying it down ; and a frequent 
appeal to this sort of experience is pre-eminently ne- 
cessary in most of the subjects of political economy, 
where various and complicated causes are often in 
operation, the presence of which can be ascertain- 
ed only in this way. A theory may appear to be cor- 
rect, and may really be correct under given premises ; 
it may further appear that these premises are the 
same as those under which the theory is about to be 
applied ; but a difference, which might before have 
been unobserved, may shew itself in the difference of 
the results from those which were expected ; and the 
theory may justly be considered as failing, whether 
this failure arises from an original error in its forma- 
tion, or from its general inapplicability, or specific 
misapplication, to actual circumstances. 

Where unforeseen causes may possibly be in ope- 
ration, and the causes that are foreseen are liable to 
great variations in their strength and efficacy, an ac- 
curate yet comprehensive attention to facts is neces- 
sary, both to prevent the multiplication of erroneous 
theories, and to confirm and sanction those that are just. 

The science of political economy is essentially 
practical, and applicable to the common business of 
human life. There are few branches of human 
knowledge where false views may do more harm, 
or just views more good. I cannot agree, therefore, 

2 



JO INTRODUCTION. 

with a writer in one of our most popular critical jour- 
nals, who considers the subjects of population, bul- 
lion, and corn laws in the same light as the scholastic 
questions of the middle ages, and puts marks of ad- 
miration to them expressive of his utter astonishment 
that such perishable stuff should engage any portion 
of the public attention.* 

In the very practical science of political economy 
perhaps it might be difficult to mention three subjects 
more practical, than those unfortunately selected for a 
comparison with scholastic questions. But in fact, 
most of the subjects which belong to it are peculiarly 
applicable to the common concerns of mankind. 
What shall we say of all the questions relating to 
taxation, various and extensive as they are ? It will 
hardly be denied that they come home to the business 
and bosoms of mankind. What shall we say of the 
laws which regulate exchangeable value, or every act 
of purchase and exchange which takes place in our 
markets ? What of the laws which regulate the pro- 
fits of stock, the interest of money, the rent of land, 
the value of the precious metals in different countries, 
the rates of exchange, &c. fee. ? 

The study of the laws of nature is, in all its 
branches, interesting. Even those physical laws by 
which the more distant parts of the universe are 
governed, and over which, of course, it is impossible 
for man to have the slightest influence, are yet noble 
and rational objects of curiosity ; but the laws which 
regulate the movements of human society have an in- 
finitely stronger claim to our attention, both because 
they relate to objects about which we are daily and 
hourly conversant, and because their effects are con- 
tinually modified by human interference. 

There are some eminent persons so strongly at- 
tached to the received general rules of political eco- 
nomy, that, though they are aware that in practice 

* Quarterly Review, No. xxix. Art. viii 



INTRODUCTION. 11 

some exceptions to them may occasionally occur; 
yet they do not think it wise and politic to notice 
them, for fear of directing the public attention too 
much and too frequently to exceptions, and thus 
weakening the force and utility of the general rules. 

It is, for instance, one of the most general rules in 
political economy, that governments should not inter- 
fere in the direction of capital and industry, but leave 
every person, so long as he obeys the laws of justice, 
to pursue his own interest in his own way, as the 
best security for the constant and equable supply of 
the national wants. Though to this rule they allow 
that exceptions may possibly occur ; yet thinking that 
the danger from the officious meddling of govern- 
ments is so much greater than any which could arise 
from the neglect of such exceptions, they would be 
inclined to make the rule universal. 

In this, however, I cannot agree. Though I should 
most readily allow that altogether more evil is likely 
to arise from governing too much, than from a ten- 
dency to the other extreme ; yet, still, if the conse- 
quences of not attending to these exceptions were of 
sufficient magnitude and frequency to be conspicuous 
to the public, I should be decidedly of opinion, that 
the cause of general principles was much more likely 
to lose than to gain by concealment. Nothing can 
tend so strongly to bring theories and general princi- 
ples into discredit, as the occurrence of consequences, 
from particular measures, which have not been fore- 
seen. Though in reality such an event forms no just 
objection to theory, in the general and proper sense 
of the term ; yet it forms a most valid objection to 
the specific theory in question, as proving it in some 
way or other wrong ; and with the mass of mankind 
this will pass for an impeachment of general princi- 
ples, and of the knowledge or good faith of those 
who are in the habit of inculcating them. It appears 
to me, I confess, that the most perfect sincerity, to- 
gether with the greatest degree of accuracy attainable, 



12 INTRODUCTION. 

founded upon the most Comprehensive view of all the 
circumstances of the case, are necessary to give that 
credit and circulation to general principles which is 
so desirable. And no views of temporary advantage, 
nor, what is more likely to operate, the fear of de- 
stroying the simplicity of a general rule, should ever 
tempt us to deviate from the strict line of truth, or to 
conceal or overlook any circumstances that may inter- 
fere with the universality of the principle. 

There is another class of persons who set a very 
high value upon the received general rules of political 
economy, as of the most extensive practical use. 
They have seen the errors of the mercantile system 
refuted and replaced by a more philosophical and cor- 
rect view of the subject ; and having made themselves 
masters of the question so far, they seem to be satisfi- 
ed with what they have got, and do not look with a 
favorable eye on new and further inquiries, particular- 
ly if they do not see at once clearly and distinctly to 
what beneficial effects they lead. 

This indisposition to innovation, even in science, 
may possibly have its use, by tending to check crude 
and premature theories ; but it is obvious that, if car- 
ried too far, it strikes at the root of all improvement. 
It is impossible to observe the great events of the last 
twenty-five years in their relation to subjects belong- 
ing to political economy, and sit down satisfied with 
what has been already done in the science. But if 
the science be manifestly incomplete, and yet of the 
highest importance, it would surely be most unwise 
to restrain inquiry, conducted upon just principles, 
even where the immediate practical utility of it was 
not visible. In mathematics, chemistry, and every 
branch of natural philosophy, how many are the in- 
quiries necessary to their improvement and com- 
pletion, which, taken separately, do not appear to 
lead to any specifically advantageous purpose ! How 
many useful inventions, and how much valuable and 
improving knowledge would have been lost, if a ra- 



INTRODUCTION. 15 

i 

tional curiosity and a mere love of information had 
not generally been allowed to be a sufficient motive 
for the search after truth ! 

I should not, therefore, consider it as by any means 
conclusive against further inquiries in political econo- 
my, it they would not always bear the rigid applica- 
tion of the test of cui bono ? But such, in fact, is the 
nature of the science, so intimately is it connected 
with the business of mankind, that I really believe 
more of its propositions will bear this test than those 
of any other department of human knowledge. 

To trace distinctly the operations of that circle of 
causes and effects in political economy which are 
acting and re-acting on each other, so as to foresee 
their results, and lay down general rules accordingly, 
is, in many cases, a task of very great difficulty. 
But there is scarcely a single inquiry belonging to 
these subjects, however abstruse and remote it may 
at first sight appear, which in some point or other 
does not bear directly upon practice. It is unques- 
tionably desirable, therefore, both with a view to the 
improvement and completion of he science, and the 
practical advantages which may be expected from it, 
that such inquiries should be pursued ; and no com- 
mon difficulty or obscurity should be allowed to de- 
ter those who have leisure and ability for such re- 
searches. 

In many cases, indeed, it may not be possible to 
predict results with certainty, on account of the 
complication of the causes in action, the different 
degrees of strength and efficacy with which they 
may operate, and the number of unforeseen circum- 
stances which are likely to interfere; but it is surely 
knowledge of the highest importance, to be able to 
draw a line, with tolerable precision, between those 
cases where the expected results are certain, and 
those where they are doubtful ; and further to be able 
satisfactorily to explain, in the latter case, the reasons 
of such uncertainty. 



14 INTRODUCTION. 

To know what can be done, and how to do it, is, 
beyond a doubt, the most valuable species of infor- 
mation. The next to it is, to know what cannot be 
done, and why we cannot do it. The first enables 
us to attain a positive good, to increase our powers, 
and augment our happiness : the second saves us 
from the evil of fruitless attempts, and the loss and 
misery occasioned by perpetual failure. 

But these inquiries demand more time and applica- 
tion than the practical statesman, whom of all others 
they most nearly concern, can give to them. In the 
public measures of every state all are, no doubt, in- 
terested ; but a peculiar responsibility, as well as in- 
terest, must be felt by those who are the principal 
advisers of them, and have the greatest influence in 
their enactment ; and if they have not leisure for such 
researches themselves, they should not be unwilling, 
under the guidance of a sound discretion, to make 
use of the advantages which may be afforded by the 
leisure of others. They will not indeed be justified 
in taking any decided steps, if they do not them- 
selves see, or at least think they see, the way they 
are going ; but they may be fairly expected to make 
use of all the lights which are best calculated to illu- 
mine their way, and enable them to reach the object 
which they have in view. 

It may perhaps be thought that, if the great princi- 
ple so ably maintained by Adam Smith be true, name- 
ly, that the best way of advancing a people to- 
wards wealth and prosperity is not to interfere with 
them, the business of government, in matters relating 
to political economy, must be most simple and easy. 

But it is to be recollected, in the first place, that 
there is a class of duties connected with these sub- 
jects, which, it is universally acknowledged, belongs 
to the Sovereign ; and though the line appears to be 
drawn with tolerable precision, when it is considered 
generally ; yet when we come to particulars, doubts 
may arise, and certainly in many instances have aris- 



INTRODUCTION. 16 

en, as to the subjects to be included in this classifica- 
tion. To what extent education and the support of 
the poor should be public concerns? What share the 
Government should take in the construction and 
maintenance of roads, canals, public docks ? What 
course it should adopt with regard to colonization 
and emigration, and in the support of forts and es- 
tablishments in foreign countries ? On all these ques- 
tions, and many others, there may be differences of 
opinion ; and on all these questions the sovereign and 
his ministers are called upon to decide. 

Secondly, every actual government has to adminis- 
ter a body of laws relating to agriculture, manufac- 
tures, and commerce, which was formed at a period 
comparatively unenlightened, and many of which, 
therefore, it must be desirable to repeal : but to see 
fully the amount of partial evil arising from present 
change, and the extent of general good to be effected 
by it, so as to warrant active interference, requires no 
inconsiderable share of knowledge and judgment; 
while to remain inactive under such circumstances, 
can only be justified by a conviction, founded on the 
best grounds, that in any specific change contemplat- 
ed, taken in all its consequences, the balance of evil 
will preponderate. 

Thirdly, there is one cause in every state which ab- 
solutely impels the government to action, and puts an 
end to the possibility of letting things alone. This 
is the necessity of taxation ; and as taxes cannot, in 
the nature of things, be imposed without interfering 
with individual industry and wealth, it becomes a 
matter of the very highest importance to know how 
they may take place with the least possible prejudice 
to the prosperity of the state, and the happiness of 
individuals. 

With regard to this latter subject indeed, it bears 
on so many points, that the truth or falsehood of the 
theories on all the priucipal questions in political econ- 
omy would occasion, or at least ought to occasion, a 



16 INTRODUCTION. 

practical difference in the mode of raising some of 
the actual taxes. It is well known that, if the the- 
ory of the Economists were true, all taxes should 
be laid on the land ; and it depends entirely upon the 
general laws which regulate the wages of labour, the 
profits of stock, the rent of land, exchangeable value, 
the currencies of different countries, the production 
and distribution of wealth, &c. &c. whether an} 7 ex- 
isting system of taxation be the best, or whether it 
might be altered for the better. 

It is obviously, therefore, impossible for a govern- 
ment strictly to let things take their natural course ; 
and to recommend such a line of conduct, without 
limitations and exceptions, could not fail to bring 
disgrace upon general principles, as totally inapplica- 
ble to practice. 

It may, however, safely be asserted, that a propen- 
sity to govern too much is a certain indication of ig- 
norance and rashness. The ablest physicians are the 
most sparing in the use of medicine, and the most in- 
clined to trust to the healing power of nature. The 
statesman, in like manner, who knows the most of his 
business, will be the most unwilling to interrupt the 
natural direction of industry and capital. But both are 
occasionally called upon to interfere, and the more 
science they respectively possess, the more judiciously 
will they do it ; nor will the acknowledged propriety 
of interfering but little supersede, in any degree, the 
use of the most extensive professional knowledge in 
both cases. 

One of the specific objects of the present work is 
to prepare the general rules of political economy for 
practical application, by a frequent reference to expe- 
rience, and by taking as comprehensive a view as I 
can of all the causes that concur in the production of 
particular phenomena. 

I am sufficiently aware, that in this mode of con- 
ducting inquiry, there is a chance of falling into er- 
rors of an opposite kind to those which arise from a 



INTRODUCTION. 



17 



tendency to simplification. Certain appearances, 
which are merely co-existent and incidental, may be 
mistaken for causes ; and a theory formed upon this 
mistake will unite the double disadvantage of being 
both complex and incorrect. I am inclined to thmk 
that Adam Smith occasionally fell into this error, and 
drew inferences from actual appearances, not warrant- 
ed by general principles. From the low price of 
wheat, for instance, during the first half of the last 
century, he seems to infer that wheat is generally 
cheaper in rich than in poor countries ; and from the 
small quantity of corn actually imported during that pe- 
riod, even in the scarcest years, he infers generally, that 
the quantity imported can never be such as to inter- 
fere with the home growth. The actual state of 
things at a subsequent period, and particularly during 
the last twenty-five years, has sufficiently shewn that 
these appearances were merely incidental ; that a very 
rich country may have its corn extremely dear, as we 
should naturally expect; and that importation in 
England has amounted to more than ^ instead of 
sfr* part of the crop raised in the country : and may, 
therefore, essentially interfere with the home growth. 

Aware, however, of my liability to this error on 
the one side, and to the error of not referring suffi- 
ciently to experience on the other, my aim will be to 
pursue, as far as I am able, a just mean between the 
two extremes, and to approach, as near as I can, to 
the great object of my research — the truth. 

Many of the doctrines of Adam Smith, which had 
been considered as settled, have lately been called in 
question by writers entitled to great attention ; but 
they have often failed, as it appears to me, to make 
good their objections ; and in all such cases I have 
thought it desirable to examine anew, with reference 
to such objections, the grounds on which his doctrines 
are founded. 

* Wealth of Nations, B. IV. c. ii. p. 190. 6th edit. 

3 



IB 



INTRODUCTION. 



It has been my wish to avoid giving to my work 
a controversial air. Yet to free it entirely from con- 
troversy, while one of my professed objects is to dis- 
cuss controverted opinions, and to try their truth by 
a reference to an enlarged experience, is obviously 
not possible. There is one modern work, in particu- 
lar, of very high reputation, some of the fundamental 
principles of which have appeared to me, after the 
most mature deliberation, to be erroneous; and I 
should not have done justice to the ability with which 
it is written, to the high authority of the writer, and 
the interests of the science of which it treats, if it had 
not specifically engaged a considerable portion of my 
attention. I allude to Mr. Ricardo's work, " On the 
Principles of Political Economy and Taxation." 

I have so very high an opinion of Mr. Ricardo's 
talents as a political economist, and so entire a con- 
viction of his perfect sincerity and love of truth, that 
I frankly own I have sometimes felt almost staggered 
by his authority, while I have remained unconvinced 
by his reasonings. I have thought that I must unac- 
countably have overlooked some essential points, 
either in my own view of the subject, or in his ; and 
this kind of doubt has been the principal reason of 
my delay in publishing the present volume. But I 
shall hardly be suspected of not thinking for myself on 
these subjects, or of not feeling such a degree of con- 
fidence in my own conclusions, after having taken 
full time to form them, as to be afraid of submitting 
them to the decision of the public. 

To those who are not acquainted with Mr. Ricar- 
do's work, and do not properly appreciate the inge- 
nuity and consistency of the system which it main- 
tains and developes with so much ability, I am ap- 
prehensive that I shall appear to have dwelt too long 
upon some of the points on which we differ. But as 
they are, for the most part, of great importance both 
theoretically and practically, and as it appeared to me 
extremely desirable, with a view to the interests of 



INTRODUCTION. 



19 



the science, that they should, if possible, be settled, I 
did not feel myself justified in giving less time to the 
consideration of them. 

I am far from saying that I may not be wrong in 
the conclusions at which I have arrived, in opposi- 
tion to those of Mr. Ricardo. But I am conscious 
that I have taken all the means to be right, which 
patient investigation and a sincere desire to get at the 
truth can give to the actual powers of my understand- 
ing. And with this consciousness, both with respect 
to the opinions 1 have opposed, and those which I 
have attempted to establish, I feel no reluctance m 
committing the results to the decision of the public. 



T. R. MALTHUS. 



East India College, ) 
Dec. 1, 1819. S 



( 20 ) 



CHAPTER I. 

ON THE DEFINITIONS OF WEALTH AND PRODUCTIVE 

LABOUR. 

SECTION I. 

On the Definitions of Wealth, 

Of the subjects which have given rise to differences 
of opinion among political economists, the definition 
of wealth is not the least remarkable. Such diffe- 
rences could hardly have taken place, if the definition 
had been obvious and easy ; but, in reality, the more 
the subject is considered, the more it will appear dif- 
ficult, if not impossible, to fix on one not liable to 
some objection. In a work, however, on a science 
the great object of which is, to inquire into the causes 
which influence the progress of wealth, it seems 
natural to look for some definition of those objects, 
the increase or decrease of which we are about to 
estimate ; and if we cannot arrive at perfect accuracy, 
so as to embrace all we wish and exclude all we 
wish in some short description, it seems desira- 
ble to approach as near to such a description as 
we can. It is known not to be very easy to 
draw a distinct line between the animal, vege- 
table, and mineral kingdoms; yet the advantage 
of such a classification is universally acknowledged ; 
and no one, on account of a difficulty in a few cases 
of little consequence, would refuse to make use of so 
convenient an arrangement. 

It has sometimes been said that every writer is at 
liberty to define his terms as he pleases, provided he 



SEC. I.] DEFINITIONS OF WEALTH, &C. 21 

always uses them strictly in the sense proposed. 
Such a liberty, however, may be fairly doubted ; at 
least it must be allowed that if a person chooses to 
give a very inadequate or unusual definition in refe- 
rence to the subject on which he proposes to treat, 
he may at once render his inquiries completely futile! 
If, for instance, a writer, professing to treat of the 
wealth of nations, were to define wealth to consist 
exclusively of broad-cloth, it is obvious that, however 
consistent he might be in the use of his terms, or 
however valuable a treatise he might produce on this 
one article, he would evidently have given but very 
little information to those who were looking for a 
treatise on wealth, according to the common accep- 
tation of the term. 

So important, indeed, is an appropriate definition, 
that perhaps it is not going too far to say, that the 
comparative merits of the systems of the Economists 
and Adam Smith depend mainly upon their different 
definitions of wealth and of productive labour. If 
the definitions which the Economists have given of 
wealth and of productive labour be correct, their sys- 
tem has the advantage: if the definitions which 
Adam femith has given of wealth and of productive 
labour be the most correct, his system is superior. 

Of those writers who have either given a regular 
definition of wealth, or have left the sense in which 
they understand the term to be collected from their 
works, some appear to have confined it within too 
narrow limits, and others to have extended it greatly 
too far. In the former class the Economists stand 
pre-eminent. They have confined wealth, or riches 
to the neat produce derived from the land ; and in so 
doing they have greatly diminished the value of their 
inquiries, m reference to the most familiar and accus- 
tomed sense in which the term, wealth, is understood. 

Among the definitions which have extended the 
meaning of the term wealth too far, Lord Lauder- 
dale s may be taken as an example. He defines 



DEFINITIONS OF WEALTH [CH. I. 

wealth to be, " All that man desires as useful and 
delightful to him."* 

This definition obviously includes every thing, 
whether material or intellectual, whether tangible or * 
otherwise, which contributes to the advantage or 
pleasure of mankind, and, of course, includes the be- 
nefits and gratifications derived from religion, from 
morals, from political and civil liberty, from oratory, 
from instructive and agreeable conversation, from 
music, dancing, acting, and other similar sources. 
But an inquiry into the nature and causes of these 
kinds of wealth would evidently extend beyond the 
bounds of any single science. If we wish to attain 
any thing like precision in our inquiries, when we 
treat of wealth, we must narrow the field of inquiry, 
and draw some line, which will leave us only those 
objects, the increase or decrease of which is capable 
of being estimated with more accuracy. 

The line, which it seems most natural to draw, is 
that which separates material from immaterial ob- 
jects, or those which are capable of accumulation and 
definite valuation, from those which rarely admit of 
these processes, and never in such a degree as to af- 
ford useful practical conclusions. 

Adam Smith has no where given a very regular 
and formal definition of wealth ; but that the meaning 
which he attaches to the term is confined to materi- 
al objects, is, throughout his work, sufficiently mani- 
fest. His prevailing description of wealth may be 
said to be, " the annual produce of land and labour." 
The objections to it, as a definition, are, that it refers 
to the sources of wealth before we are told what 
wealth is, and that it is besides not sufficiently dis- 
criminate, as it would include all the useless products 
of the earth, as well as those which are appropriated 
and enjoyed by man. 

* Inquiry into the Nature aod Origin of FuWic Wealth, c. ti. p. 57. 2d. edit. 



SEC. II.] AND PRODUCTIVE LABOUR. 23 

To avoid these objections, and to keep at an equal 
distance from a too confined or too indiscriminate sense 
of the term, I should define wealth to be, those mate- 
rial objects which are necessary, useful, or agreeable 
to mankind. And I am inclined to believe, that the 
definition, thus limited, includes nearly all the objects 
which usually enter into our conceptions when we 
speak of wealth or riches ; an advantage of consi- 
derable importance, so long as we retain these terms 
both m common use, and in the vocabulary of political 
economy. 

It is obviously, indeed, rather a metaphorical than 
a strict use of the word wealth, to apply it to every 
benefit or gratification of which man is susceptible • 
and we should hardly be prepared to acknowledge 
the truth of the proposition which affirmed, that rich- 
es were the sole source of human happiness. 

It may fairly, therefore, 1 think, be said, that the 
wealth spoken of, in the science of political economy 
is confined to material objects. 

A country will therefore be rich or poor according 
to the abundance or scarcity with which these mate- 
rial objects are supplied, compared with the extent of 
territory ; and the people will be rich or poor accord- 
ing to the abundance with which they are supplied- 
compared with the population. 



SECTION II. 

On Productive and Unproductive Labour. 

The question of productive labour is closely con- 
nected with the definition of wealth. Both the Eco- 
nomists and Adam Smith have uniformly applied the 
term productive to that species of labour which pro- 
duces what they call wealth, according to their seve- 
ral views of its nature and origin. The Economists 



24 DEFINITIONS OF WEALTH. [CH. I. 

therefore, who confine wealth to the products of the 
soil, mean by productive labour, that labour alone 
which is employed upon the land. Adam Smith, who 
considers all the material objects which are useful to 
man as wealth, means by productive labour, that la- 
bour, which realizes itself either in the production or 
increased value of such material objects. 

This mode of applying the term, productive labour, 
to the labour which is productive of wealth, howev- 
er wealth may be defined, is obviously useful, and, 
with a view to clearness and consistency in the use 
of the terms of political economy, should always be 
adhered to. But as some writers have not used the 
terms in this way, and as those who have been dispos- 
ed so to use them have not agreed in their definitions 
of wealth, it was to be expected that the term pro- 
ductive labour should give rise to great differences of 

opinion. . 

The doctrine laid down by Adam Smith on this 
subject has been controverted by two opposite parties, 
one of which has imputed to him an incorrect and 
unphilosophical extension of the term, productive, to 
objects which it ought not to include, and others have 
accused him of a similar want of precision, for at- 
tempting to establish a distinction between different 
sorts of labour where no distinction is to be found. 

In proceeding to give my reasons for adopting the 
opinion of Adam Smith, I shall first endeavour to 
shew, that some such classification of the different 
kinds of labour is really called for in an inquiry into 
the nature and causes of the wealth of nations, and 
that a considerable degree of confusion would be in- 
troduced into the science of political economy by an 
attempt to proceed without it. We shall be less dis- 
posed to be disturbed by plausible cavils, or even by a 
few just exceptions to the complete accuracy of a 
definition, if we are convinced that the want of pre- 
cision which is imputed to it, is beyond comparison 



9EC. II.] AND PRODUCTIVE LABOUR. 

less in amount and importance than the want of 
precision which would result from the rejection of 
it. 

In the first place then, it will readily be granted, 
that as capital, in whatever way it may be defined, is 
absolutely necessary to the division of labour and the 
use of machinery, its powerful influence on the pro- 
gress of national wealth must be considered as incon- 
trovertibly established. But in tracing the cause of 
the different effects of produce employed as capital, 
and of produce consumed as revenue, we shall 
find that it arises from the different kinds of la- 
bour maintained by each ; and in speaking, therefore, 
and treating of capital, it seems quite necessary 
to have some term for the kind of labour which it 
generally employs, in contradistinction to the kind of 
labour generally employed by revenue, in order to ex- 
plain its nature and operation, and^ the causes of its 
increase. 

Secondly, it is stated by Adam Smith, and it m-ist 
be allowed to be stated justly, that the produce which 
is annually saved is as regularly consumed as that 
which is annually spent, but that it is consumed by 
a different set of people. If this be the case, and if 
saving be allowed to be the immediate cause of the 
increase of capital, it must be absolutely necessary, in 
all discussions relating to the progress of wealth, to 
distinguish by some particular title a set of people, 
who appear to act so important a part in accelerating 
this progress. Almost all the lower classes of peo- 
ple of every society are employed in some way or 
other, and if there were no grounds of distinction 
in their employments, with reference to their ef- 
fects on the national wealth, it is difficult to con- 
ceive what would be the use of saving from reve- 
nue to add to capital, as it would be merely em- 
ploying one set of people in preference to another, 
when, according to the hypothesis, there is no essen- 
tial difference between them. How then are we to 

4 



26 DEFINITIONS OF WEALTH [CH. I. 

explain the nature of saving, and the different effects 
of parsimony and extravagance upon the national 
capital ? No political economist of the present day 
Can by saving mean mere hoarding; and beyond this 
contracted and inefficient proceeding, no use of the 
term, in reference to national wealth, can well be im- 
agined, but that which must arise from a different ap- 
plication of what is saved, founded upon a real distinc- 
tion between the different kinds of labour which may 
be maintained by it. 

If the labour of menial servants be as productive 
of wealth as the labour of manufacturers, why should 
not savings be employed in their maintenance, not 
only without being dissipated, but with a constant in- 
crease of value ? But menial servants, lawyers, or 
physicians, who save from their salaries, are fully 
aware that their savings would be immediately dissi- 
pated again, if they were advanced to themselves, in- 
stead of being employed in the maintenance of per- 
sons of a different description. To consider the ex- 
penditure of the unproductive labourers of Adam 
Smith, as advances made to themselves, and of the 
same nature as the advances of the master-manufac- 
turer to his workmen, would be at once to confound 
the very useful and just distinction between those who 
live upon wages and those who live upon profits, and 
would render it quite impossible to explain the fre- 
quent and important operations of saving from reve- 
nue to add to capital, so absolutely necessary to the 
continued increase of wealth.* 

It is not the question at present, whether saving may 
or may not be carried too far (a point which will be 
considered in its proper place) ; but whether we can 
talk intelligibly of saving and accumulation, and dis- 

*Onr of the mostnhlp impuzners of the doctrine of Adam Smith respect i n? prod u* - 
five Inborn is Mr. G.inilh, in Ids valu.ibie Work on the various Systems of political 
Economy; but lie appear*, to me tof.dl entirely, when he attempts to shew that s:>\ 
are preserved instead of being destroyed, when consumed by the idle classes. 1 cau- 
not understand ia whal smse it inn be said that menial servant! annually reproduce 
the capital by which they are fed. Book III. c. ii. 



SEC. II.] AND PRODUCTIVE LABOUR. 21 

cuss their effects on national wealth, without allowing 
some distinction in the different kinds of labour. 

Thirdly, it has been stated by Adam Smith, and 
stated truly, that there is a balance very different from 
the balance of trade, which, according as it happens to 
be favourable or unfavourable, occasions the prospe- 
rity or decay of every nation : this is the balance of 
the annual produce and consumption. If in given 
periods the produce of a country exceeds its consump- 
tion, the means of increasing its capital will be pro- 
vided, its population will soon increase, or the actual 
numbers will be better accommodated, and probably 
l>oth. If the consumption in such periods fully equals 
the produce, no means of increasing the capital will 
be afforded, and the society will be nearly at a stand. 
If the consumption exceeds the produce, every suc- 
ceeding period will see the society worse supplied, 
and its prosperity and population will be evidently on 
the decline. 

But if this balance be so important, if upon it de- 
pends the progressive, stationary, or declining state 
of a society, surely it must be of importance to distin- 
guish those who mainly contribute to render this 
balance favourable from those who chiefly contribute 
to make the other scale preponderate. Without some 
such distinction we shall not be able to trace the 
causes why one nation is thriving and another is de- 
clining; and the superior riches of those countries 
where merchants and manufacturers abound, compar- 
ed with those in which the retainers of a court and an 
overgrown aristocracy predominate, will not admit of 
an intelligible explanation. 

If a taste for idle retainers and a profusion of me- 
nial servants had continued among the great land- 
holders of Europe from the feudal times to the pre- 
sent, the wealth of its different kingdoms would have 
been very different from what it now is. Adam Smith 
has justly stated that the growing taste of our ances- 
tors for material conveniences and luxuries, instead of 
personal services, was the main cause of the change. 



DEFINITIONS OF WEALTH [CH. I. 

Personal services neither require nor generate capital ; 
and while they continue the predominant taste, must 
necessarily divide the great mass of society into two 
classes, the proprietors of land and their servants, the 
rich and the poor, one of which is in a state of abject 
dependance upon the other. But a taste for material 
objects, however frivolous, almost always requires for 
its gratification the accumulation of capital, and the 
existence of manufacturers or merchants, wholesale 
dealers and retail dealers. The face of society is 
thus wholly changed. A middle class of persons, 
living upon the profits of stock, rises into wealth and 
consequence. And an increasing accumulation of 
capital, almost exclusively derived from the mercantile 
and manufacturing classes, effects, to a considerable 
extent, the division and alienation of those immense 
landed properties, which, if the fashion of personal 
services had continued, might have remained to this 
time nearly in their former state, and prevented the 
increase of wealth on the land as well as elsewhere. 

I am hardly aware how the causes of the increas- 
ing riches and prosperity of Europe since the feudal 
times could be traced, if we were to consider per- 
sonal services as equally productive of wealth with 
the labours of merchants and manufacturers. 

Surely then some distinction between the different 
kinds of labour, with reference to their different effects 
on national wealth, must be admitted to be not only 
useful but necessary ; and if so, the next question is, 
what this distinction should be, and where the line 
between productive and unproductive labour should be 
drawn. 

The opinion that the term, productive labour, 
should be exclusively confined to the labour employ- 
ed upon the land, has been maintained by the Econo- 
mists and their followers. As another opportunity 
will occur of discussing the general merits of their 
system, it will only be necessary to observe here that, 
whatever advantages their definition may boast in 
point of precision and consistency, yet for the practi- 



SEC. II.] AND PRODUCTIVE LABOUR. 29 

cal and useful purposes of comparing different coun- 
tries together, with regard to all those objects which 
usually enter into our conceptions when we speak of 
wealth, it is much too confined. Two countries of 
the same territory and population might possess the 
same number of agricultural labourers, and even direct 
the same quantity of skill and capital to the cultivation 
of the soil ; and yet, if a considerable portion of the 
remaining population in one of them consisted of ma- 
nufacturers and merchants, and in the other of menial 
servants and soldiers, the former might have all the 
indications of wealth, and the latter all the symptoms 
of poverty. The number of agricultural labourers, 
therefore, cannot alone determine the national wealth. 
We evidently want some definition of productiveness, 
which shall refer to the effects of manufacturing and 
mercantile capital and skill ; and unless we consider 
the labour which produces these most important re- 
sults as productive of riches, we shall find it quite im- 
possible to trace the causes of those different appear- 
ances in different nations, which all persons, whatever 
may be their theories, universally agree in attributing 
to different degrees of wealth. 

The opinion which goes to the opposite extreme of 
the one here noticed, and calls all labour equally pro- 
ductive, has already been almost sufficiently consi- 
dered in the endeavour to shew, that a distinction be- 
tween the different kinds of labour is really wanted in 
an inquiry into the nature and causes of the wealth of 
nations. 

I shall only add here, that some such distinction 
must be considered as so clearly the corner-stone of 
Adam Smith's work, and the foundation on which the 
main body of his reasonings rests, that, if it be denied, 
the superstructure which he has raised upon it must 
fall to the ground. Of course I do not mean to say, 
that his reasonings should not fall if they are erro^ 
neous ; but it appears to me in some degree inconsis- 
tent in those who allow of no distinction in the diffe- 
rent kinds of labour, to attribute any considerable 



DEFINITIONS OF WEALTH. [CH. I. 

value to an Inquiry into the nature and causes of iht 
Wealth of Nations, in which the increase of the quan- 
tity and skill of what is called productive labour, is the 
main hinge on which the progress of national opulence 
and prosperity is made to turn. 

There is, indeed, another way of considering the 
subject, which though different from that of Adam 
Smith, would not invalidate his reasonings, and would 
merely require a slight alteration in the terms used. 

If we do not confine wealth to tangible and mate- 
rial objects, we might call all labour productive, but 
productive in different degrees ; and the only change 
that would be required in Adam Smith's work, on ac- 
count of this mode of .considering the subject, would 
be, the substitution of the terms, more productive, and 
less productive, for those of productive and unproduc- 
tive. 

All labour, for instance, might be stated to be pro- 
ductive of value to the amount of the value paid for it, 
and in proportion to the degree in which the produce 
of the different kinds of labour, when sold at the price 
of free competition, exceeds in value the price of the 
labour employed upon them. 

Upon this principle the labours of agriculture would, 
generally speaking, be the most productive ; because 
the produce of nearly all the land actually in use is 
not only of sufficient exchangeable value to pay the 
labourers employed upon it, but the profits of the 
stock advanced by the farmers, and the rents of the 
land let by the proprietors. Next to the labours of 
agriculture, those labours would in general be most 
productive, the operations of which were most assist- 
ed by capital or the results of previous labour, as in 
all those cases the exchangeable value produced wou>d 
most exceed the value of the labour employed in the 
production, and would support, in the shape of pro- 
fits, the greatest number of additional persons, and 
tend most to the accumulation of capital. 

The labour least productive of wealth would be 
that, the results of which were only equal in exchange- 



SEC. II.] AND PRODUCTIVE LABOUR. SI 

able value to the value paid for such labour, which 
would support therefore no other classes of society 
but the labourers actually employed, would replace 
little or no capital, and tend the least directly and ef- 
fectively towards that kind of accumulation which 
facilitates future production. In this last division 
of productive labour would, of course, be found all 
the unproductive labourers of Adam Smith. 

This mode of considering the subject has, perhaps, 
some advantages in particular points over that of 
Adam Smith. It would establish a useful and tole- 
rably accurate scale of productiveness, instead of di- 
viding labour only into two kinds, and drawing a 
hard line of distinction between them. It would de- 
termine, in the very definition, the natural pre-emi- 
nence of agriculture, which Adam Smith is obliged 
to explain afterwards* and, at the same time, shew 
the numerous cases where an increase of manufactur- 
ing and mercantile labour would be more productive, 
both to the state and to individuals, than an increase 
of agriculture ; as in all those, where, from a greater 
demand for manufactured and mercantile products, 
compared with the produce of the land, the profits of 
manufacturing and mercantile capital were greater 
than both the rent and profits combined of labour em- 
ployed upon new and less fertile land. 

It would answer sufficiently to all the reasonings 
of Adam Smith on the accumulation of capital, the 
distinction between capital and revenue, the nature 
and effects of saving, and the balance of produce and 
consumption, merely by using the terms more and less 
productive, for productive and unproductive; and 
would have the additional advantage of keeping more 
constantly in view the necessary union of capital and 
skill with the more productive kinds of labour ; and 
thus shew the reason why all the labourers of a 
savage nation might, according to Adam Smith, be 
productive, and yet the nation increase very slowly 
in wealth and population, while a rapid increase of 



32 DEFINITIONS OF WEALTH [CH. I. 

both might be taking place in an improved country 
under a proportion of productive labourers very much 

inferior. 

With regard to the kinds of labour which Adam 
Smith has called unproductive, and for which classi- 
fication his theory has been most objected to, their 
productiveness to the amount of their worth in the 
estimation of the society, varying, of course, accord- 
ing to the different degrees of skill acquired, and the 
different degrees of plenty or scarcity in which they 
are found, would be fully allowed, though they would 
still always be distinguished from those more produc- 
tive kinds of labour which support other classes of 
the society besides the labourers themselves. 

Agricultural labour would stand in the first rank, 
for this simple reason, that its gross produce is suffi- 
cient to maintain a portion of all the three great clas- 
ses of society ; those who live upon rent, those who 
live upon profits, and those who live upon wages. 
Manufacturing and mercantile labour would stand in 
the next rank ; because the value of its produce will 
support a portion of two of these orders of society. 
And the unproductive labourers of Adam Smith 
would stand in the third rank of productiveness ; be- 
cause their labours directly support no other classes 
but themselves. 

This seems to be a simple and obvious classifica- 
tion, and places the different kinds of labour in a natu- 
ral order with regard to productiveness, without in- 
terfering in any respect with their mutual depen- 
dance on each other as stimulants to each other's 

increase. 

The great objection to this scale of productiveness 
is that, at its first setting out, it makes the circum- 
stance of the payment made for any particular kind 
of exertion, instead of the quality of the produce, the 
criterion of its being productive. According to Adam 
Smith, the exertion which produces a pair of stock- 
ings, is productive labour, whether they are knit by a 



SEC. II.] AND PRODUCTIVE LABOUR. 33 

lady for her amusement, or made by a regular stock- 
ing-weaver ; but, according to the present theory, as 
no payment has been made for them, they cannot be 
considered as wealth. Upon the same principle the 
song of a strolling actress, or the declamation of a 
speaker at the Westminster Forum, would be the re- 
sult of productive labour, because paid for ; while a 
very superior song by a lady, or a speech in the 
House of Commons from the first orator of the age, 
abounding in eloquence and information, would be 
unproductive. 

And yet, if we once desert matter, and still make 
no distinction of this kind, with reference to payment, 
we are at once thrown upon a field so wide, as utter- 
ly to confound all attempts to estimate the compara- 
tive quantity of productive labour in different coun- 
tries. If the exertion which produces a song, wheth- 
er paid for or not, be productive labour, why should 
the exertion, which produces the more valuable result 
of instructive and agreeable conversation, be exclud- 
ed ? why should we exclude the efforts necessary to 
discipline our passions, and to become obedient to all 
the laws of God and man, the most valuable of all la- 
bours ? why, indeed, should we exclude any exertion, 
the object of which is to obtain happiness or avoid 
pain, either present or future ? and yet under this de- 
scription may be comprehended the exertions of 
every human being during every moment of his exis- 
tence. It is quite clear, therefore, that, with any 
view to the use which may be made of the term, it 
must be more confined. 

It may be said, indeed, with regard to the term, 
labour, that it seems to imply valuation and payment, 
and has nothing to do with unbought, voluntary ex- 
ertions. But the whole difficulty returns in the defi- 
nition of riches ; and if we do not confine them to 
material objects, and yet wish to make some practical 
use of the term in comparing different countries to- 
gether, we must include in our definition only those 



34 DEFINITIONS OF WEALTH [CH. I. 

personal services which are bought ; and thus draw 
the line which separates what ought to be called 
riches, from what ought not to be so denominated, 
between objects which may in all respects be pre- 
cisely the same, except that one is the result of paid 
labour, and the other of unbought exertions. 

If, for instance, we were to define wealth to be 
whatever has value in exchange, it is obvious that 
acting, dancing, singing, and oratory would some- 
times be wealth and sometimes not ; and even with 
regard to food and the most essential necessaries of life, 
excessive plenty or the custom of producing without 
exchanging, would render the definition nugatory. 

If, in denominating personal services, wealth, we 
do not look to the quality of what is produced, but 
merely to the effect of the payment received for it in 
stimulating other wealth, this is introducing a new 
and separate consideration, which has no relation to 
the direct production of wealth. In this view it will 
be seen that I attach very great importance to the un- 
productive labourers of Adam Smith ; but this is evi- 
dently not as producers themselves, but as stimulating 
others to produce, by the power which they possess 
of making a demand in proportion to the payment 
they have received. In this sense the mortgagee and 
public creditor are productive labourers to the amount 
of what they receive. But though the division of 
property occasioned by these classes of society may 
be useful, and tend indirectly to stimulate the produc- 
tion of wealth by increasing demand, it would be 
confounding all natural 'distinctions to call them pro- 
ductive labourers. It would be equally incorrect to 
assert that the unproductive labourers of Adam Smith 
necessarily create the wealth which pays them. It is 
true that the desire to enjoy the convenience or pa- 
rade of personal attendance and the benefit of medical 
advice has a strong tendency to stimulate industry ; 
but tney are both purchased in large quantities by 
persons who have no means of increasing their in- 



SEC. II.] AND PRODUCTIVE LABOUR. 35 

i 

comes in consequence of this expenditure, and some- 
times they are bought by the actual destruction of 
capita], and the positive diminution of the power of 
production. Though we allow, therefore, fully, their 
tendency to act as a stimulus to the production of 
wealth, yet they can never be said necessarily to 
create it ; and even under the circumstances most fa- 
vourable to their influence, their operation is obvious- 
ly indirect, and not immediate. 

When we consider then the difficulties which pre- 
sent themselves on every supposition we can make, 
it may fairly be doubted whether it is probable that 
we shall be able to find a distinction more useful for 
practical purposes, and, on the whole, less objectiona- 
ble in point of precision, than that of Adam Smith ; 
which draws the line that distinguishes riches from 
other kinds of value, between what is matter and 
what is not matter, between what has duration and 
what has no duration, between what is susceptible of 
accumulation and definite valuation, and what is 
without either one or both of these essential pro- 
perties. 

Some degree of duration, and a consequent sus- 
ceptibility of accumulation, seems to be essential to 
our usual conceptions of wealth, not only because 
produce of this kind seems to be alone capable of 
forming those accumulations which tend so mrich to 
facilitate future production, but because they alone 
contribute to increase that store reserved for con- 
sumption, which is certainly one of the most distin- 
guishing marks of riches compared with poverty. 
The characteristic of poverty seems to be to live 
from hand to mouth. The characteristic of riches is 
to have a store to apply to for the commodities want- 
ed for immediate consumption. But in every case of 
productive labour, as explained by Adam Smith, there 
is always a period, though in some cases it may be 
very short, when either the stock destined to replace 
a capital, or the stock reserved for immediate con- 
sumption is distinctly augmented by it; and to 



36 DEFINITIONS OF WEALTH [CH. I. 

this quality of adding to the national stock, the 
term, enriching, or productive of riches, seems to be 
peculiarly appropriate. 

But it is not enough that it should be susceptible 
of accumulation, and of adding to the national stock, 
to entitle it to be called productive according to the 
general meaning of Adam Smith. In order to make 
the term useful for practical purposes, the kind of la- 
bour to which it refers should be susceptible of some 
sort of definite valuation. The laws of the legisla- 
tor, the precepts of the moralist, and the conclusions 
of the natural philosopher, may certainly be said to 
be susceptible of accumulation and of receiving assis- 
tance from past labour ; but how is it possible to esti- 
mate them, or to say to what amount the country 
has been enriched by them? whereas the labour 
which is the necessary condition of the supply of ma- 
terial objects, is estimated in the price at which they 
are sold, and may fairly be presumed to add to the 
wealth of the country an amount at least equal to the 
value paid for such labour. And probably, with few 
or no exceptions, it is only the kind of labour which 
is realized upon material products that is at once 
susceptible of accumulation and definite valuation. 

It has been observed by Monsieur Gamier in his 
valuable edition of the Wealth of Nations, that it 
seems very strange and inconsistent to denominate 
musical instruments, riches, and the labour which pro- 
duces them productive, while the music which they 
yield, and which is the sole object for which they are 
made, is not to be considered in the same light; and 
the performers, who can alone put them to their pro- 
per use, are called unproductive labourers.* But the 
difference between material products and those which 
are not matter, sufficiently warrants the distinction in 
point of precision and consistency ; and the utility of 
it is immediately obvious from the facility of giving 

* Vol. V. Note xx. 



SEC. II.] AND PRODUCTIVE LABOUR. SI 

a definite valuation to the instruments, and the abso- 
lute impossibility of giving such a valuation to all the 
tunes which may be played upon them. 

It has also been observed by the same authority 
that it is still more inconsistent to denominate the 
clerk of a merchant a productive labourer, and a clerk 
employed by the government, who may in some cases 
have precisely the same kind of business to do, an 
unproductive labourer.* To this, however, it may be 
replied, that in all business conducted with a view to 
the profit of individuals, it may fairly be presumed 
that there are no more clerks or labourers of any kind 
employed, nor with higher salaries, than necessary. 
But the same presumption cannot be justly entertain- 
ed w ith regard to the business of government ; and 
as the results of the labours of its servants are not 
brought to market, nor their salaries distributed with 
the same rigid attention to the exchangeable value of 
their services, no just criterion is afforded for deter- 
mining this value. 

At the same time it may be remarked, that if a 
servant of government performs precisely the same 
kind of labour in the preparation or superintendance 
of material products as the servant of a merchant, 
he ought to be considered as a productive labourer, 
and one among the numerous instances which are al- 
ways occurring of productive labourers, or labourers 
occasionally productive, to be found among those 
classes of society which, with regard to the great 
mass of their exertions, may with propriety be cha- 
racterized as unproductive. This kind of exception 
must of course frequently happen, not only among 
the servants of government, but throughout the whole 
range of menial service, and in every other situation 
in society. Almost every person indeed must occa- 
sionally do some productive labour ; and the line of 
separation which Adam Smith has drawn between 

* Vol. V. Note xx. 



38 DEFINITIONS OF WEALTH [CH. I. 

productive and unproductive labour may be perfectly 
distinct, although the denomination which he has giv- 
en to the different classes of society, founded on their 
general character, must unavoidably be inaccurate 
with regard to the exertions of some individuals. 

It should also be recollected that Adam Smith fully 
allows the value and importance of many sorts of la- 
bour which he calls unproductive. From the enu- 
meration indeed which he has made of these different 
sorts, he must be aware that some of them produce a 
value with which the results of the labour employed in 
making ribbands and laces, or indeed of any other la- 
bour but that which directly supplies our most pressing 
physical wants, cannot for a moment be compared. 
Indirectly, indeed, and remotely, there cannot be a 
doubt that even the supply of these physical wants is 
most powerfully promoted by the labours of the mo- 
ralist, the legislator, and those who have exerted 
themselves 10 obtain a good government; but the 
main value of these labours evidently depends upon 
the encouragement which they give to the full deve- 
lopment of talents and industry, and their conse- 
quent invariable tendency to increase the quantity 
of material wealth. So far, therefore, as they con- 
tribute to promote this supply, their general effect, 
though not its precise amount, will be estimated in the 
quantity of those material objects which the country 
can command, and so far as they contribute to other 
sources of happiness besides those which are derived 
from matter, it may be more correct to consider them 
as belonging to a class of objects, many of which 
cannot, without the greatest confusion, be made to 
enter into the gross calculations which relate to nation- 
al wealth. To estimate the value of Newton's dis- 
coveries, or the delight communicated by Shakspeare 
and Milton, by the price at which their works have 
sold, would be but a poor measure of the degree in 
which they have elevated and enchanted their coun- 
try ; nor would it be less groveling and incongruous 



SEC. II.] AND PRODUCTIVE LABOUR. 39 

to estimate the benefit which the country has derived 
from the Revolution of 1688 by the pay of the sol- 
diers, and all other payments concerned in effecting 
it. fe 

On the whole, therefore, allowing that the labours 
of the moralist and the manufacturer, the legislator 
and the lacemaker, the agriculturist and the vocal per- 
former, have all tor their object the gratification of 
some want or wish of mankind, it may still be the 
most natural, useful, and correct classification which 
the subject will admit, first to separate, under the 
name of wealth or riches, every thing which gratifies 
the wants of man by means of material objects, and 
then to denominate productive, every kind of labour 
which is directly productive of wealth, that is, so di- 
rectly, as to be estimated in the value of the objects 
produced. 

The reader will see that I have not introduced this 
discussion with a view to the establishment of any 
nice and subtle distinctions without a practical object. 
My purpose is to shew that there is really some diffi- 
culty in the definition of wealth, and of productive la- 
bour ; but that this difficulty should not deter us from 
adopting any classifications which are really useful in 
conducting inquiry; that in treating of the nature and 
causes of the wealth of nations, a distinction between 
the different sources of gratification and the different 
kinds of labour seems to be not only highly useful 
but almost absolutely necessary; and consequently 
that we should be satisfied with the best classification 
which we can get on these subjects, although it may 
not in all its parts be unobjectionable. 



( 40 ) 



CHAPTER II, 

ON THE NATURE AND MEASURES OF VALUE. 

SECTION I. 

Of the different Sorts of Value. 

Most writers in treating of the nature of value, have 
considered it as having two different meanings, one, 
value in use, and the other, value in exchange. It 
may be questioned whether in fact we are in the ha- 
bit of using the term in the first of these two senses. 
We do not often hear of the value of air and water, 
although they are bodies in the highest degree useful, 
and indeed essentially necessary to the life and happi- 
ness of the human race. It may be admitted, how- 
ever, that the term, taken perhaps in a metaphorical 
rather than a literal sense, may imply, and is 
sometimes used to imply, whatever is necessary or 
beneficial to us, and in this sense may apply, with- 
out impropriety, to a clear spring of water or to a 
fine air, although no question could arise respect- 
ing their value in exchange. 

As this meaning, therefore, of the word, value, has 
already been admitted by many writers into the voca- 
bulary of political economy, and, although not much 
sanctioned by custom, is justifiable in a metaphorical 
if not in a literal sense, it may not be worth while to 
reject it ; and it need only to be observed, that as the 
application of the word value in this way is very 
much less frequent than in the other, it should never 
appear alone, but should always be marked by the 
addition, in use. 



SEC. I.] MEASURES OF VALUE. 41 

Value in exchange is founded, as the term seems 
to imply, on the will and power to exchange one 
commodity for another. It does not depend merely 
upon the scarcity in which commodities exist, nor 
upon the inequality of their distribution ; but upon 
the circumstance of their not being distributed accord- 
ing to the wills and powers of individuals, or in such 
quantities to each, as the wills and powers of indi- 
viduals will enable them ultimately to effect by means 
of exchanges. 

If nature were to distribute, in the first instance, 
all her goods precisely as they are ultimately distri- 
buted previous to consumption, there would be no 
question of exchanges or exchangeable value, and yet 
the mass of commodities would both exist in a degree 
of scarcity and be very unequally divided. 

In this distribution one man might have only bread, 
and another venison and claret in addition to bread. 
The man who had only bread might wish to make 
an exchange, but would not have the power, and the 
man who had venison and claret besides bread would 
have the power to make an exchange, but not the 
wish. Under these circumstances the commodities 
possessed by each would not be brought into contact, 
and the relative value of bread and venison would 
never be determined. 

To determine this, it is necessary that the posses- 
sors of venison should want bread, as well as that the 
possessors of bread should want venison, and when 
this was the case, venison and bread would soon be 
brought into comparison with each other, and the 
means afforded of ascertaining their relative values. 

Every exchange, therefore, must imply, not only 
the power and will to give some article in exchange 
for one more wanted, but a reciprocal demand in the 
party possessing the article wanted, for the article 
proposed to be exchanged for it. 

When this reciprocal demand exists, the rate at 
which the exchange is made, or the portion of one 

6 



42 ON THE NATURE AND [CH. II. 

commodity which is given for an assigned portion of 
the other, will depend upon the relative estimation in 
which they are held by the parties, founded on the 
desire to possess, and the difficulty or facility of pro- 
curing possession. 

Owing to the necessary difference of the desires 
and powers of individuals, it is probable that the con- 
tracts thus made were in the first instance very diffe- 
rent from each other. Among some individuals it 
might be agreed to give six pounds of bread for a 
pound of venison, and among others only two. But 
the man who was ready and willing to give six pounds 
of bread for a pound of venison, if he heard of a per- 
son at a little distance who would take two pounds 
for the same quantity, would of course not continue 
to give six ; and the man who would consent to give 
a pound of venison for only two pounds of bread, if 
he could any where else obtain six, would not continue 
to make an exchange from which he derived only 
two. 

After a certain time it might be expected that an 
average would be formed, founded upon all the offers 
of bread, compared with all the offers of venison. 
And thus, as is very happily described by Turgot, a 
current value of all commodities in frequent use 
would be established.* 

It would be known, not only that a pound of veni- 
son was worth four pounds of bread, but that it was 
also worth perhaps a pound of cheese, a quarter of a 
peck of wheat, a quart of wine, a certain portion of 
leather, &c. &c. each of an average quality .f 

Each commodity would in this way measure the 
exchangeable value of all others, and would, in its 
turn, be measured by any one of them. Each com- 
modity would also be a representative of value. The 
possessor of a quart of wine might consider himself 

* Formation et Distribution dee Richeases, $ nxv. 
t Id. § xli. 



SEC. I.] MEASURES OF VALUE. 43 

in possession of a value equal to four pounds of bread, 
a pound of cheese, a certain portion of leather, &c. 
&c. and thus each commodity would, with more or 
less accuracy and convenience, possess two essential 
properties of money, that of being both a representa- 
tive and measure of value. 

But long before it is conceivable that this general 
valuation of commodities, with regard to each other, 
should have taken place to any considerable extent, 
or with any tolerable degree of accuracy, a great dif- 
ficulty in the estimation of relative value would be 
constantly recurring, from the want of a reciprocal 
demand. The possessor of venison might want bread, 
but the possessor of bread to whom he applies may 
not want venison, or by no means that quantity which 
the owner would wish to part with. This want of 
reciprocal demand must occasion, in many instances, 
and in places not very remote from each other, the 
most unequal exchanges, and except in large fairs or 
markets, where a great quantity and variety of com- 
modities were brought together, would seem almost 
to preclude the possibility of any thing like such a 
general average valuation of commodities as has been 
just described. 

Every man, therefore, in order to secure this reci- 
procal demand, would endeavour, as is justly stated 
by Adam Smith,* so to carry on his business as to 
have by him, besides the produce of his own particu- 
lar trade, some commodity for which there was so 
general and constant a demand, that it would scarce- 
ly ever be refused in exchange for what he wanted. 
In order that each individual in a society should be 
furnished with that share of its whole produce to 
which he is entitled by his wants and powers, it is 
not only necessary that there should be some mea- 
sure of this share, but some medium by which he 

* Wealth of Nations, Book I. c. iv. 



44 ON THE NATURE AND [CH. II. 



can obtain it in the quantity and at the time best suit- 
ed to him. 

The constantly recurring want of some such medi- 
um occasioned the use of various commodities for this 
purpose in the early periods of society. 

Of these, cattle seem to have been- the most gene- 
ral. Among pastoral nations, cattle are not only kept 
without difficulty or loss by those who may receive 
them, but as they form the principal possessions and 
wealth of society in this stage of its progress, they 
must naturally have been the subject of frequent ex- 
changes, and their exchangeable value, in conse- 
quence, compared with other commodities, would be 
pretty generally known. 

It seems to be quite necessary indeed, that the 
commodity chosen for a medium of exchange should, 
in addition to the other qualities which may fit it for 
that purpose, be in such frequent use, as that its cur- 
rent value should be tolerably well established. 

A curious and striking proof of this, is that, not- 
withstanding the peculiar aptitude of the precious 
metals to perform the functions of a medium of ex- 
change, they had not been used for that purpose in 
Mexico, at the period of its conquest by the Spaniards, 
although these metals were in some degree of plenty 
as ornaments, and although the want of some medium 
of exchange was clearly evinced by the use of the 
nuts of cacao for that purpose.* 

It is probable that as the practice of smelting and 
refining the ores of the precious metals had not yet 
been resorted to, the supply of them was not suffi- 
ciently steady, nor was the use of them sufficiently 
general to fit them for the purpose required. 

In Peru, where the precious metals were found by 
the Spaniards in much greater abundance, the prac- 
tice of smelting and refining the richest ores had be- 
gun to prevail, although no shafts had been sunk 

* Robertson's America, Vol. III. Book vii. p. 215. 



SEC I.] MEASURES OF VALUE. 45 

to any depth in the earth.* But in Peru the state of 
property was so peculiar, and so nearly approaching 
to a community of goods, that a medium of exchange 
seems not to have been called for, at least, there is no 
account of the use of either of the precious metals 
or of any other commodity in the capacity of mo- 
ney. 

In the Old World, the art of smelting and refining 
the ores of gold, silver, and copper, seems to have 
been known to some of the most improved nations of 
which we have accounts, from the earliest ages ; and 
as soon as the annual accumulations of these metals 
and the means used to obtain them had rendered their 
supply to a certain degree steady, and they had been 
introduced into common use in the shape of orna- 
ments, instruments, and utensils, their other peculiar 
and appropriate qualities, such as their durability, di- 
visibility, uniformity of substance, and great value in 
a small compass, would naturally point them out as 
the best commodity that could be selected to answer 
the purpose of a measure of value and medium of ex- 
change. 

But when they were adopted as the general 
measure of value, it would follow of course that all 
commodities would be most frequently compared with 
this measure. The precious metals would be, on al- 
most all occasions, the commodity named, and might 
properly, therefore, be called the nominal value of 
the commodities to the measure of which they were 
applied. 

This sort of value has sometimes been exclusively 
designated by the name of price ; and though it is 
not uncommon to speak of the price of a commodity 
in labour, or in other commodities, and the term when 
so used is sufficiently intelligible, yet it would certain- 
ly be better to confine it strictly to the value of com- 
modities estimated in the precious metals, or in the 

* Robertson's America, Vol. III. Bookvii. p. 252. 



46 ON THE NATURE AND [CH. ll. 

currencies of different countries which profess to re- 
present them ; and, indeed, when used without the 
above additions, this is what the term is always un- 
derstood to mean. Price then may be considered as 
a more confined term than value, and as representing 
one, and one only of the senses in which the more 
general term is used. 

The introduction of a measure which determined 
the nominal and relative value of commodities, and 
of a medium which would be accepted at all times in 
exchange for them, was a most important step in the 
progress of society, and tended to facilitate exchanges 
and stimulate production to an extent which, without 
such an instrument, would have been perfectly im- 
possible. 

It is very justly observed by Adam Smith, that it 
is the nominal value of goods, or their prices only, 
which enter into the consideration of the merchant. 
It matters very little to him whether a hundred 
pounds, or the goods which he purchases with this 
sum, will command more or less of the necessaries 
and conveniences of life in Bengal than in London. 
What he wants is an instrument by which he can ob- 
tain the commodities in which he deals and estimate 
the relative values of his sales and purchases. His 
returns come to him wherever he lives ; and whether 
it be in London or Calcutta, his gains will be in pro- 
portion to the excess of the amount at which he sells 
his goods compared with the amount which they cost 
him to bring to market, estimated in the precious me- 
tals. 

But though the precious metals answer very effect- 
ually the most important purposes of a measure of 
value, in the encouragement they give to the distribu- 
tion and production of wealth ; yet it is quite obvious 
that they fail as a measure of the exchangeable value 
of objects in different countries, or at different periods 
in the same country. 



3E€. I.] MEASURES OF VALUE. 47 

If we are told that the wages of day-labour in a 
particular country are, at the present time, four-pence 
a day ; or that the revenue of a particular sovereign, 
700 or 800 years ago, was 400,000/. a year; these 
statements of nominal value convey no sort of infor- 
mation respecting the condition of the lower classes 
of people, in the one case, or the resources of the 
sovereign, in the other. Without further knowledge 
on the subject, we should be quite at a loss to say, 
whether the labourers in the country mentioned were 
starving, or living in great plenty ; whether the king 
in question might be considered as having a very in- 
adequate revenue, or whether the sum mentioned was 
so great as to be incredible.* 

It is quite obvious that in cases of this kind, and 
they are of constant recurrence, the value of wages, 
incomes or commodities estimated in the precious me- 
tals, will be of little use to us alone. What we want 
further, is some estimate of a kind which may be de- 
nominated real value in exchange, implying the quan- 
tity of the necessaries and conveniences of life which 
those wages, incomes, or commodities will enable the 
possessor of them to command. Without this know- 
ledge, the nominal values above mentioned may lead 
us to the most erroneous conclusions ; and in contra- 
distinction to such values, which often imply an in- 
crease or decrease of wealth merely in name, the term, 
real value in exchange, seems to be just and appropri- 
ate, as implying an increase or decrease in the power 
of commanding real wealth, or the most substantial 
goods of life. 

That a correct measure of real value in exchange 
would be very desirable, cannot be doubted, as it 
would at once enable us to form a just estimate and 
comparison of wages, incomes, and commodities, in 
all countries and at all periods ; but when we consi- 

• Hume very reasonably doubts the possibility of William the Conqueror's reve- 
nue being L. 400,000 a year, aa represented by an aacieat historiao, and adapted hv 
subsequent writers. r ~ 



48 ON THE NATURE AND [cH. II. 

der what a measure of real value in exchange implies, 
we shall feel doubtful whether any one commodity 
exists, or can easily be supposed to exist, with such 
properties, as would qualify it to become a standard 
measure of this kind. Whatever article, or even 
mass of articles, we refer to, must itself be sub- 
ject to change ; and all that we can hope for is an 
approximation to the measure which is the object of 
our search. 

We are not however justified, on this account, in 
giving a different definition of real value m ex- 
change, if the definition already adopted be at once 
the most usual and the most useful. We have the 
power indeed arbitrarily to call the labour which 
has been employed upon a commodity its real value ; 
but in so doing we use words in a different sense from 
that in which they are customarily used ; we con- 
found at once the very important distinction between 
cost and value ; and render it almost impossible to 
explain, with clearness, the main stimulus to the 
production of wealth, which in fact, depends upon 
this distinction. 

The right of making definitions must evidently be 
limited by their propriety, and their use in the science 
to which they are applied. After we have made a 
full allowance for the value of commodities in use, or 
their intrinsic capacities for satisfying the wants of 
mankind, every other interpretation of the term value 
seems to refer to some power in exchange ; and if it 
do not refer to the power of an article in exchange 
for some one commodity named, such as money, it 
must refer to its power in exchange for 3 or 4, 5 or 
6, 8 or 10 together, to the mass of commodities com- 
bined, or to its power of commanding labour which 
most nearly represents this mass. 

There can be no question of the propriety and use- 
fulness of a distinction between the power of a com- 
modity in commanding the precious metals, and its 
power of commanding the necessaries and conve- 



SEC. I.] MEASURES OF VALUE. 49 

niences of life, including labour. It is a distinction 
absolutely called for, whenever we are comparing the 
wealth of two nations together, or whenever we are 
estimating the value of the precious metals in differ- 
ent states and at different periods of time. And till 
it has been shewn that some other interpretation of 
the term real value in exchange, either agrees better 
with the sense in which the words are generally ap- 
plied, or is decidedly more useful in an inquiry into 
the nature and causes of the wealth of nations, I 
shall continue to think, that the most proper defini- 
tion of real value in exchange, in contradistinction to 
nominal value in exchange, is, the power of com- 
manding the necessaries and conveniencies of life, 
including labour, as distinguished from the power of 
commanding the precious metals. 

If then we continue to apply the term, value, in 
the first sense mentioned, we shall have, three sorts of 
value — 

1. Value in use ; which may be defined to be the 
intrinsic utility of an object. 

2. Nominal value in exchange ; which may be 
defined to be, the value of commodities in the pre- 
cious metals. 

3. Real value in exchange ; which may be defin- 
ed to be the power of an object to command in 
exchange the necessaries and conveniences of life, in- 
cluding labour. 

The distinctions here made between the different 
kinds of value are, in the main, those of Adam Smith ; 
though it must be acknowledged that he has not been 
sufficiently careful to keep them always separate. In 
speaking of the value of corn, he has sometimes left 
us in doubt whether he means value in use, or real 
value in exchange ;* and he sometimes, as I shall 
have occasion to notice further on, confounds the cost 

* Wealth of Nations, Book IV. Chap. v. p. 278. 6th Edit. 



50 ON THE NATURE AND [CH. II. 

of a commodity in labour with its value in command- 
ing labour, which are essentially different.* 

These instances however may, perhaps, be fairly 
considered in the light of inadvertences. At the end 
of the third chapter of his first book he has explain- 
ed value in use, in the same manner as it has been ex- 
plained here ; and in part of the succeeding chapter, 
on the real and nominal prices of commodities ', he has 
made exactly the same distinction between real and 
nominal value, the propriety of which, as it has been 
controverted, it has been my endeavour to establish. 
To these distinctions he has, in the main, adhered ; 
they properly belong to his system ; and he has devi- 
ated from them only when, from some cause or other, 
he was not fully aware of the inconsistency of such 
deviation. 



SECTION II. 

Of Demand and Supply, as they affect Exchangeable Value, 

The terms Demand and Supply are so familiar to the 
ear of every reader, and their application in single in- 
stances so fully understood, that in the slight use 
which has hitherto been made of them, it has not 
been thought necessary to interrupt the course of the 
reasoning by explanations and definitions. These 
terms, however, though in constant use, are by no 
means applied with precision. And before we pro- 
ceed farther, it may be advisable to clear this part of 
the ground as much as possible, that we may be cer- 
tain of the footing on which we stand. This will 
appear to be the more necessary, as it must be allow- 
ed, that of all the principles in political economy, 

* Wealth of Nations, Book I. Chap. v. 




SEC. II.] MEASURES OF VALUE. 51 

there is none which bears so large a share in the phe- 
nomena which come under its consideration, as the 
principle of supply and demand. 

It has been already stated, that all value in ex- 
change depends upon the power and will to exchange 
one commodity for another ; and when, by the intro- 
duction of a general measure of value and medium of 
exchange, society has been divided, in common lan- 
guage, into buyers and sellers, demand may be defin- 
ed to be, the will combined with the power to pur- 
chase, and supply, the production of commodities 
combined with the intention to sell them. In this 
state of things, the relative values of commodities in 
money, or their prices, are determined by the relative 
demand for them, compared with the supply of them ; 
and this law appears to be so general, that probably 
not a single instance of a change of price can be 
found which may not be satisfactorily traced to some 
previous change in the causes which affect the de- 
mand or supply. 

In examining the truth of this position we must 
constantly bear in mind the terms in which it is ex- 
pressed ; and recollect that, when prices are said to 
be determined by demand and supply, it is not meant 
that they are determined either by the demand alone 
or the supply alone, but by their relation to each 
other. 

But how is this relation to be ascertained ? It has 
been sometimes said that supply is always equal to 
demand, because no permanent supply of any com- 
modity can take place for which there is not a de- 
mand so effective as to take off all that is offered. 
In one sense of the terms in which demand and sup- 
ply have occasionally been used, this position may be 
granted. The actual extent of the demand, compar- 
ed with the actual extent of the supply, are always 
on an average proportioned to each other. If the 
supply be ever so small, the extent of the effective de- 
mand cannot be greater ; and if the supply be ever so 



62 ON THE NATURE AND [CH. II. 

great, the extent of the demand, or the consumption, 
will either increase in proportion, or a part of it will 
become useless and cease to be produced. It cannot, 
therefore, be in this sense that a change in the pro- 
portion of demand to supply affects prices ; because 
in this sense, demand and supply always bear the 
same relation to each other. And this uncertainty in 
the use of these terms renders it an absolutely neces- 
sary preliminary in the present inquiry, clearly to as- 
certain what is the nature of that change in the mu- 
tual relation of demand and supply, on which the 
prices of commodities so entirely depend. 

The demand for a commodity has been defined 
to be, the will combined with the power to pur- 
chase it. 

I The greater is the degree of this will and power 
with regard to any particular commodity, the greater 
or the more intense may be fairly said to be the de- 
mand for it. But however great this will and power 
may be among the purchasers of a commodity, none 
of them will be disposed to give a high price for it, 
if they can obtain it at a low one ; and as long as the 
abilities and competition of the sellers induce them to 
bring the quantity wanted to market at a low price, 
the real intensity of the demand will not shew itself. 

If a given number of commodities, attainable by 
labour alone, were to become more difficult of acqui- 
sition, as they would evidently not be obtained unless 
by means of increased exertion, we might surely con- 
sider such increased exertion, if applied, as an evi- 
dence of a greater intensity of demand, or of a power 
and will to make a greater sacrifice in order to obtain 
them. 

In fact it may be said, that the giving a greater 
price for a commodity absolutely and necessarily im- 
plies a greater intensity of demand ; and that the real 
question is, what are the causes which either call 
forth or render unnecessary the expression of this in- 
tensity of demand? 



3EC. II.] MEASURES OF VALUE. 



53 



It has been justly stated, that the causes which 

Tl , r3,Se i hC FiCe ? ^ article est »«^ed in 
some commodity named, and supposed for short 
periods not essentially to vary, are an increase in the 
number or wants of ,ts purchasers, or a deficiency in 
its supply ; and the causes which lower the price are 
a d.minutio„ m the number or wants of its purcha- 
ser £, or / n ""creased abundance in its supply. 

I he first class of these causes is obviously calculat- 
ed to call forth the expression of a greater inten ftv 
of demand, and the other of a less. " 

bit ,allv r ZTT/ c ? mmodit J which had been ha- 
bitually demanded and consumed by a thousand pur- 

tel - !}^? ^ wante/by two thousS, 
1 .' it tha l h f ore ll "s increased extent of demand 
could be supplied some must go without that which 
they wanted ; and it is scarcely possible to supposlthat 
the intensity of individual demand would noHncrease 
among a sufficient number of these two thou and pur! 
chasers to take off all the commodity produced I a? an 
mcreascd price. At the same time, if we could sup 
pose it possible that the wills and powers ofThe Z 
chasers or the intensity of their demand, would™ 
admit of increase, it s quite certain that, however Te 
mater might be settled among the contending com- 
petitors, no rise of price could take place 

In the same manner, if a commodity were to be di- 
minished one half in quantity, it is scarcely possible 
to suppose that a sufficient number of the fifrinS pur f 
chasers vvould not be both willing and able to take 
off the whole of the diminished quantity a a higher 
price ; but if they really would not or ^ould notdo 
this, the price could not rise. 

dudnV h tL° ther h ^-' if the P e ™ane„t cost of pro- 
ducing the commodity were doubled, it is evident 

l t*Tl y SUC u 3 qUantU ^ COuld be Permanently pro 
duced as would supply the wants of those who yyere 
able and willing to make a sacrifice for the attain 
ment of their wishes equal to double the amount rf 



■J4, ON THE NATURE AND 



[CH. II- 



what they did before. The quantity of the commo- 
dt^wS would be brought to market under these 
circumstances might be extremely. ^"J^J ^ 
be reduced to the supply of a single ^m Q ua or 
miffht remain precisely the same as beiore. n i 
wefe reduced Jthe sumny of a sing le mdmdu ah 
would be a proof tha^onlj ^JJjfi 
chasers was both ame ana wmius 
tive demand for it at the advanced pnje. .H .the ^sup 
ply remained the same, it would be a F f th ^ aU 
tbe Durchasers were in this state, but that the expres 
IVoftWs intensity of demand had not before been 
-Ta^d necessary. In the latter case, there would 
Efi M?^3ity supplied and the same quantity 
Smanded • but there would be a much greater mten- 
sty of demand called forth ; and this may be fairly said 
to be a most important change in the relation be- 
iween mr/upply and the demand of these commo- 
Ss because, without the increased intensity of de- 
mand: wWch in this case takes place, the commodity 
wouti rease to be produced ; that a, the > Mute $ Jj 
supply would be contingent upon the failure ot the 
power or will to make a greater sacrifice for the ob 

JC Vonfhe same principles, if a commodity were to 
become much more abundant, compared with the lor 
me number of purchasers, this increased supply 
co uld noT be all sola, unless the #*£«£%& 
F^ch seller wishing to dispose of that part ot tne 
fommody which h! possessed, would go on lowering 
ft TiU he had effected his object ; and though the 
will and powers of the old purchasers might remain 
diminished, yet as the commodity could be obtain- 
ed wTthout the expression of the same intensity of de- 
mand as before, Wis demand would of course not 

th T sSaSL would obviously take place from 
the consumers of a commodity requiring a less quan- 
tity of it. 



SEC. II.] MEASURES OF VALUE. &§ 

If, instead of a temporary abundance of supply 
compared with the demand, the cost of producing 
any particular commodity were greatly diminished, 
the fall of price would in the same manner be oc- 
casioned by an increased abundance of supply 
either actual or contingent. In almost all practical 
cases it would be an actual and permanent increase, 
because the competition of sellers would lower the 
price ; and it very rarely happens that a fall of price 
does not occasion an increased consumption. On the 
supposition, however, of the very rare case that a de- 
finite quantity only of the commodity was required 
whatever might be its price, it is obvious that from 
the competition of the producers a greater quantity 
would be brought to market than could be consumed 
till the price was reduced in proportion to the increas- 
ed facility of production ; and this excess of supply 
would be always contingent on the circumstance of 
the price being at any time higher than the price 
which returns average profits. In this case of a fall 
of prices, as in the other of a rise of prices, the actual 
quantity of the commodity supplied and consumed 
may possibly, after a short struggle, be the same as 
before ; yet it cannot be said that the demand is the 
same. It may indeed exist precisely in the same de- 
gree, and the actual consumers of the commodity 
might be perfectly ready to give what they gave be- 
fore rather than go without it ; but such has been the 
alteration in the means of supply compared with the 
demand, that the competition of the producers ren- 
ders the same intensity of demand no longer neces- 
sary to effect the supply required ; and not being ne- 
cessary, n is of course not called forth, and the price 
laus. 

It is evidently, therefore, not merely extent of ac- 
tual demand, nor even the extent of actual demand 
compared with the extent of actual supply, which 
raises prices, but such a change in the relation be- 
tween supply and demand as renders necessary the 



56 ON THE NATURE AND [ CH< * 

expression of a greater intensity of demand, in order 
Xi peaceably to divide any actual produce or 
prevJnt P the future produce of the same kmd from 

^ And, in the same manner, it is not merely extent of 
actual upply, nor the extent of the actual supply 
comnared P with the actual demand, that lowers pnces, 
bTsuch a change in the relation of the supj jg com- 
pared with the demand, as renders a fall ot price ne 
cessary, in order to take off a temporary abundance 
or to prevent a constant excess of supply contingent 
upon a diminution in the cost of production, without 
a proportionate diminution m the price of the pro- 

dU If the terms demand and supply be understood and 
used in the way here described, there is no case of 
price, whether temporary or permanent, which they 
will not determine ; and in every instance of terga m 
and sale it will be perfectly correct to say that the 
price will depend upon the relation of the demand to 

the iwish y i*t particularly to be observed that in this 
discussion I have not given any new meaning to the 
terms, demand and supply. In the use which have 
occasionally made of the words intense and intensity 
as applied to demand, my sole purpose has been to 
explain the meaning which has hitherto always been 
attached to the term demand when it is said to laise 
nSces .Mr. Ricardo in his chapter On the influence of 
demand and supply on prices* observes, that the 
demand for a commodity cannot be said to increase, 
if no additional quantity of it be purchased or con- 
sumed." But it is obvious, as I have before re- 
marked, that it is not in the sense of mere extent of 
consumption that demand raises prices because it is 
almost always when the prices are the lowest that the 
extent of consumption is the greatest. This, there- 

* Principle, of Polit. Econ. chap. MS. p- 493. 2d edit 



SEC. III.] MEASURES OF VALUE. 57 

fore, cannot be the meaning hitherto attached to the 
term, demand, when it is said to raise prices. Mr. 
Ricardo, however, subsequently quotes Lord Lau- 
derdale's statements respecting value,* and allows them 
to be true, as applied to monopolized commodities, 
and the market prices of all other commodities for a 
limited period. He would allow, therefore, that the 
deficiency of any article in a market would occasion 
a great demand for it, compared with the supply, and 
raise its price, although in this case less than usual of 
the article must be purchased by the consumers. De- 
mand, in this sense, is obviously quite different from 
the sense in which Mr. Ricardo had before used the 
term. The one implies extent of consumption, the 
other intensity of demand, or the will and power to 
make a greater sacrifice in order to obtain the object 
wanted. It is in this latter sense alone that demand 
raises prices ; and my sole object in this section is to 
shew that, whenever we talk of demand and supply 
as influencing prices, whether market or natural, the 
terms should always be understood in the sense in 
which Mr. Ricardo and every other person has hith- 
erto understood them, when speaking of commodities 
bought and sold in a market. 



SECTION III. 

Of the Cost of Production as it affects Exchangeable Value. 

It may be said, perhaps, that even according to the 
view given of demand and supply in the preceding 
section, the permanent prices of a great mass of com- 
modities will be determined by the cost of their pro- 
duction. This is true, if we include all the compo- 

* Id. p. 495. 

8 



58 ON THE NATURE AND [CH. II. 

nent parts of price stated by Adam Smith, though 
not if we consider only those stated by Mr. Ricardo. 
But, in reality, the two systems, one of which ac- 
counts for the prices of the great mass of commodi- 
ties by the cost of their production, and the other ac- 
counts for the prices of all commodities, under all 
circumstances, permanent as well as temporary, by 
the relation of the demand to the supply, though they 
touch each other necessarily at a greater number of 
points, have an essentially different origin, and require, 
therefore, to be very carefully distinguished. 

In all the transactions of bargain and sale, there is 
evidently a principle in constant operation, which can 
determine, and does actually determine, the prices of 
commodities, quite independently of any considera- 
tions of cost, or of the quantity of labour and capi- 
tal employed upon their production. And this is 
found to operate, not only permanently upon that 
class of commodities which may be considered as 
monopolies, but temporarily and immediately upon all 
commodities, and strikingly and pre-eminently so up- 
on all sorts of raw produce. 

It has never, been a matter of doubt that the prin- 
ciple of supply and demand determines exclusively, 
and very regularly and accurately, the prices of mo- 
nopolized commodities, without any reference to the 
cost of their production ; and our daily and uniform 
experience shews us that the prices of raw products, 
particularly of those which are most affected by the 
seasons, are at the moment of their sale determined 
always by the higgling of the market, and differ 
widely in different years and at different times, while 
the labour and capital employed upon them may have 
been very nearly the same. This is so obvious, that 
probably very few would hesitate to believe what is 
certainly true, that, if in the next year we could by any 
process exempt the farmers from all cost in the produc- 
tion of their corn and cattle, provided no change 
were made in the quantity brought to market, and 

i 



SEC. III.] MEASURES OF VALUE. 59 

the society had the same wants and the same powers 
of purchasing, the prices of raw products would be 
the same as if they had cost the usual labour and ex- 
pense to procure them. 

With regard, therefore, to a class of commodities 
of the greatest extent, it is acknowledged that the ex- 
isting market prices are, at the moment they are fix- 
ed, determined upon a principle quite distinct from 
the cost of production, and that these prices are in 
reality almost always different from what they would 
have been, if this cost had regulated them. 

There is indeed another class of commodities, such 
as manufactures, particularly those in which the raw 
material is cheap, where the existing market prices 
much more frequently coincide with the cost of pro- 
duction, and may appear, therefore, to be exclusive- 
ly determined by it. Even here, however, our fa- 
miliar experience shews us that any alteration in the 
demand and supply quite overcomes for a time the in- 
fluence of this cost ; and further, when we come to 
examine the subject more closely, we find that the 
cost of production itself only influences the prices of 
these commodities as the payment of this cost is 
the necessary condition of their continued supply. 

But if this be true, it follows, that the great princi- 
ple of demand and supply is called into action to de- 
termine what Adam Smith calls natural prices as well 
as market prices. 

It will be allowed without hesitation that no change 
can take place in the market prices of commodities 
without some previous change in the relation of de- 
mand and supply. And the question is, whether the 
same position is true in reference to natural prices ? 
1 his question must of course be determined by at- 
tending carefully to the nature of the change which 
an alteration in the cost of production occasions in 
the state of the demand and supply, and particularlv 
to the specific and immediate cause by which the 
change of price that takes place is effected. 



60 ON THE NATURE AND [CH. II. 

We all allow, that when the cost of production di- 
minishes, a fall of price is generally the consequence; 
but what is it, specifically, which forces down the 
price of the commodity ? It has been shewn in the 
preceding section that it is an actual or contingent 

excess of supply. 

We all allow that, when the cost of production in- 
creases, the prices of commodities generally rise. 
But what is it which specifically forces up the price ? 
It has been shewn that it is a contingent failure of sup- 
ply. Remove these contingencies, that is, let the ex- 
tent of the supply remain exactly the same, without 
contingent failure or excess, whether the price of pro- 
duction rises or falls, and there is not the slightest 
ground for supposing that any variation of price 
would take place. 

If, for instance, all the commodities that are con- 
sumed in this country, whether agricultural or manu- 
factured, could be produced, during the next ten years, 
without labour, and yet could only be supplied exact- 
ly in the same quantities as they would be in a natu- 
ral state of things ; then, supposing the wills and the 
powers of the purchasers to remain the same, there 
cannot be a doubt that all prices would also remain 
the same. But, if this be allowed, it follows, that the 
relation of the supply to the demand, either actual or 
contingent, is the dominant principle in the determi- 
nation of prices whether market or natural, and that 
the cost of production can do nothing but in subordi- 
nation to it, that is, merely as this cost affects actually 
or contingently the relation which the supply bears 

to the demand. 

It is not however necessary to resort to imagi- 
nary cases in order to fortify this conclusion. Ac- 
tual experience shews the principle in the clearest 

In' the well known instance, noticed by Adam 
Smith, of the insufficient pay of curates, notwith- 



SEC. III.] MEASURES OF VALUE. 61 

standing all the efforts of the legislature to raise it,* 
a striking proof is afforded that the permanent price 
of an article is determined by the demand and supply, 
and not by the cost of production. The real cost of 
production would, in this case, be more likely to be 
increased than diminished by the subscriptions of be- 
nefactors ; but being paid by others and not by the 
individuals themselves, it does not regulate and limit 
the supply ; and this supply, on account of such en- 
couragement, becoming and continuing abundant, the 
price is and must always be low, whatever may be 
the real cost of the education given. 

The effects of the poor-rates in lowering the wages 
of labour present another practical instance of the 
same kind* It is not probable that public money 
should be more economically managed than the in- 
come of individuals. Consequently the cost of rear- 
ing a family cannot be supposed to be diminished by 
parish assistance ; but, a part of the expense being 
borne by the public, a price of labour adequate to the 
maintenance of a certain family is no longer a neces- 
sary condition of its supply ; and as, by means of 
parish rates, this supply can be obtained without such 
wages, the real costs of supplying labour no longer 
regulate its price. 

In fact, in every kind of bounty upon production, 
the same effects must necessarily take place ; and just 
in proportion as such bounties tend to lower prices, 
they shew that prices depend upon the supply com- 
pared with the demand, and not upon the costs of 
production. 

But the most striking instance which can well be 
conceived to shew that the cost of production only 
influences the prices of commodities as it regulates 
their supply, is continually before our eyes, in the 
artificial value which is given to Bank notes, by 
limiting their amount. Mr. Ricardo's admirable and 

* Wealth of Nations Book I. c. x. p. 202. 6th edit. 



62 ON THE NATURE AND [CH. II. 

efficient plan for this purpose proceeds upon the just 
principle, that, if you can limit the supply of notes, 
so that they shall not exceed the quantity of gold 
which would have circulated, if the currency had 
been metallic, you will keep the notes always of the 
same value as gold. And I am confident he would 
allow, that if this limitation could be completely ef- 
fected without the paper being exchangeable for gold, 
the value of the notes would not be altered. But, it 
an article which costs comparatively nothing in mak- 
ing, though it performs one of the most important 
functions of gold, can be kept to the value of gold by 
being supplied in the same quantity, it is the clearest 
of all possible proofs that the value of gold itself no 
further depends upon the cost of its production, than 
as this cost influences its supply, and that if the cost 
were to cease, provided the supply were not increas- 
ed, the value of gold in this country would still re- 
main the same. 

It does not, however, in any degree follow from 
what has been said, that labour and the costs of pro- 
duction have not a most powerful effect upon prices. 
But the true way of considering these costs is, as the 
necessary condition of the supply of the objects 

wanted. 

Although, at the time of the actual exchange of 
two commodities, no circumstance affects it but the 
relation of the supply to the demand ; yet, as almost 
all the objects of human desire are obtained by the 
instrumentality of human exertion, it is clear that the 
supply of these objects must be regulated — first, by 
the quantity and direction of this exertion ; secondly, 
by the assistance which it may receive from the re- 
sults of previous labour ; and thirdly, by the abun- 
dance or scarcity of the materials on which it has to 
work, and of the food of the labourer. It is of im- 
portance, therefore, to consider the different condi- 
tions which must be fulfilled, in order that any com- 
modity should continue to be brought to market. 



SEC. III.] MEASURES OF VALUE. QS 

The first condition is, that the labour which has 
been expended on it should be so remunerated in the 
value of the objects given in exchange, as to encour- 
age the exertion of a sufficient quantity of industry in 
the direction required, as without such adequate re- 
muneration the supply of the commodity must neces- 
sarily fail. If this labour should be of a very severe 
kind, few comparatively would be able or willing to 
engage in it ; and, upon the common principles of ex- 
changeable value before explained, it would rise in 
price. If the work were of a nature to require an 
uncommon degree of dexterity and ingenuity, a rise 
of price would take place in a greater degree ; but 
not certainly, as stated by Adam Smith, on account 
of the esteem which men have for such talents,* but 
on account of their rarity, and the consequent rarity 
of the effects produced by them. In all these cases 
the remuneration will be regulated, not by the intrin- 
sic qualities of the commodities produced, but by the 
state of the demand for them compared with the sup- 
ply, and of course by the demand and supply of the 
sort of labour which produced them. If the commo- 
dities have been obtained by the exertion of manual 
labour exclusively, aided at least only by the unappro- 
priated bounties of nature, the whole remuneration 
will, of course, belong to the labourer, and the usual 
value of this remuneration, in the existing state of the 
society, would be the usual price of the commodity. 

The second condition to be fulfilled is, that the as- 
sistance which may have been given to the labourer, 
from the previous accumulation of objects which faci- 
litate future production, should be so remunerated as 
to continue the application of this assistance to the 
production of the commodities required. If by means 
of certain advances to the labourer of machinery, 
food, and materials previously collected, he can exe- 
cute eight or ten times as much work as he could 

* Weilth of Nation*, Book I. c. vi. p. 71. 6th edit. 



64 ON THE NATURE AND [CH. II. 

without such assistance, the person furnishing them 
might appear, at first, to be entitled to the difference 
between the powers of unassisted labour and the 
powers of labour so assisted. But the prices of com- 
modities do not depend upon their intrinsic utility, 
but upon the supply and the demand. The increased 
powers of labour would naturally produce an increas- 
ed supply of commodities ; their prices would conse- 
quently fall ; and the remuneration for the capital ad- 
vanced would soon be reduced to what was necessa- 
ry, in the existing state of the society, to bring the 
articles to the production of which they were applied 
to market. With regard to the labourers employed, 
as neither their exertions nor their skill would neces- 
sarily be much greater than if they had worked un- 
assisted, their remuneration would be nearly the same 
as before, and would depend entirely upon the ex- 
changeable value of the kind of labour they had con- 
tributed, estimated in the usual way by the demand 
and the supply. It is not, therefore, quite correct to 
represent, as Adam Smith does, the profits of capital as 
a deduction from the produce of labour. They are 
only a fair remuneration for that part of the production 
contributed by the capitalist, estimated exactly m the 
same way as the contribution of the labourer. 

The third condition to be fulfilled is, that the price 
of commodities should be such as to effect the con- 
tinued supply of the food and raw materials used by 
the labourers and capitalists ; and we know that this 
price cannot be paid without yielding a rent to the 
landlord on almost all the land actually in use. In 
speaking of the landlords, Adam Smith's language is 
again exceptionable. He represents them, rather in- 
vidiously, as loving to reap where they have never 
sown, and as obliging the labourer to pay for a 
licence to obtain those .natural products, which, when 
land was in common, cost only the trouble of collect- 
ing.* But he would himself be the first to acknow- 

* Wealth of NationB, Book I. ch. vi. p. 74. 6th edit. 



SEC. III.] MEASURES OF VALUE. 66 

ledge that, if land were not appropriated, its produce 
would be, beyond comparison, less abundant, and con- 
sequently dearer ; and, if it be appropriated, some per- 
sons or other must necessarily be the proprietors. It 
matters not to the society whether these persons are 
the same or different from the actual labourers of the 
land. The price of the produce will be determined 
by the general supply compared with the general de- 
mand, and will be precisely the same, whether the 
labourer pays a rent, or uses the land without rent. 
The only difference is that, in the latter case, what 
remains of this price, after paying the labour and 
capital, will go to the same person that contributed 
the labour, which is almost equivalent to saying, that 
the labourer would be better off, if he were a posses- 
sor of land as well as labour — a fact not to be disput- 
ed, but which by no means implies that the labourer, 
who in the lottery of human life has not drawn a 
prize of land, suffers any -hardship or injustice in 
being obliged to give something in exchange for the 
use of what belongs to another. The possessors of 
land, whoever they may be, conduct themselves, with 
regard to their possessions, exactly in the same way 
as the possessors of labour and of capital, and ex- 
change what they have, for as many other commodi- 
ties as the society is willing to give them for it. 

The three conditions therefore above specified 
must, in every society, be necessarily fulfilled, in 
order to obtain the supply of by far the greater part 
of the commodities which it wants ; and the compen- 
sation which fulfils these conditions, or the price of 
any exchangeable commodity, may be considered as 
consisting of three parts — that which pays the wa^es 
of the labourer employed in its production ; that 
which pays the profits of capital by which such pro- 
duction has been facilitated ; and that which pays the 
rent of land, or the remuneration for the raw materi- 
als and food furnished by the landlord ;— the price 
of each of these component parts being determined 

9 



Q6 ON THE NATURE AND [CH. II. 

exactly by the same causes as those which determine 
the price of the whole. 

The price which fulfils these conditions is precisely 
what Adam Smith calls the natural price. I should 
be rather more disposed to call it the necessary price, 
because the term necessary better expresses a refe- 
rence to the conditions of supply, and is, on that ac- 
count, susceptible of a more simple definition. To 
explain natural price, Adam Smith is obliged to use a 
good deal of circumlocution ; and though he makes it 
on the whole sufficiently clear, yet, as he calls to his 
assistance two other terms, each of which might al- 
most as well have been used as the one adopted, the 
definition is not quite satisfactory.* If, however, we 
use the term suggested, the definition of necessary 
price will be very easy and simple. It will be, the 
price necessary, in the actual circumstances of the 
society, to bring the commodity regularly to the mar- 
ket. This is only a shorter description of what 
Adam Smith means by natural price, as contradistin- 
guished from market price, or the price at which 
commodities actually sell in the market, which, from 
the variations of the seasons or the accidental miscal- 
culations of the suppliers, are sometimes sold higher 
and sometimes lower than the price which is neces- 
sary to fulfil the conditions of a regular supply. 

When a commodity is sold at this its natural price, 
Adam Smith says, it is sold for precisely what it is 
worth. But here, I think, he has used the term 
worth in an unusual sense. Commodities are con- 
tinually said to be worth more than they have cost, 
ordinary profits included ; and according to the cus- 
tomary and proper use of the term tvorth, we could 
never say, that a certain quantity of corn, or any oth- 
er article, was not worth more when it was scarce, al- 
though no more labour and capital might have been em- 

* Book I. chap. vii. 



SEC. IV.] MEASURES OF VALUE. 67 

ployed about it. The worth of a commodity is its mar- 
ket price, not its natural 6r necessary price ; it is its 
value in exchange, not its cost; and this is one of the 
instances in which Adam Smith has not been suffi- 
ciently careful to keep them separate.* 

But if it appear generally that the cost of produc- 
tion only determines the prices of commodities, as the 
payment of it is the necessary condition of their supply, 
and that the component parts of this cost are them- 
selves determined by the same causes which deter- 
mine the whole, it is obvious that we cannot get rid 
of the principle of demand and supply by referring to 
the cost of production. Natural and necessary prices 
appear to be regulated by this principle, as well as 
market prices ; and the only difference is, that the 
former are regulated by the ordinary and average re- 
lation of the demand to the supply, and the latter, 
when they differ from the former, depend upon the 
extraordinary and accidental relations of the demand 
to the supply. 



SECTION IV. 

Of the Labour which a Commodity has Cost, considered as a 
Measure of Exchangeable Value, 

Adam Smith, in his chapter on the real and nomi- 
nal price of commodities,t in which he considers la- 
bour as an universal and accurate measure of value, 
has introduced some confusion into his inquiry, by not 
adhering strictly to the same mode of applying the 
labour which he proposes for a measure. 

Sometimes he speaks of the value of a commodity 
as being determined by the quantity of labour which 

* Book I. chap. vii. f Book I. chap. v. 



68 ON THE NATURE AND [CH. II. 

its production has cost, and sometimes by the quan- 
tity of labour which it will command in exchange. 

'These two measures are essentially different ; and, 
though certainly neither of them can come under the 
description of a standard, one of them is a very much 
more useful and accurate measure of value than the 
other. 

When we consider the degree in which labour is 
fitted to be a measure of value in the first sense used 
by Adam Smith, that is, in reference to the quantity 
of labour which a commodity has cost in its produc- 
tion, we shall find it radically defective. 

In the first place, a moment's considertion will shew 
us that it cannot be applied in a positive sense. It is 
indeed almost a contradiction in terms to say, that the 
exchangeable value of a commodity is proportioned 
to the quantity of labour employed upon it. Ex- 
changeable value, as the term implies, evidently means 
value in exchange for some other commodities ; but 
if, when more labour is employed upon one commo- 
dity, more labour is also employed on the others 
for which it is exchanged, it is quite obvious that the 
exchangeable value of the first commodity cannot be 
proportioned to the labour employed upon it. If, for 
instance, at the same time that the labour of produc- 
ing corn increases, the labour of producing money 
and many other commodities increases, there is at 
once an end of our being able to say with truth, that 
all things become more or less valuable in proportion 
as more or less labour is employed in their production. 
In this case it is obvious that more labour has been 
employed upon corn, although a bushel of corn may 
still exchange for no more money nor labour than be- 
fore. The exchangeable value of corn, therefore, 
has certainly not altered in proportion to the addition- 
al quantity of labour which it has cost in its pro- 

djuction. 

But, even if we take this measure always in a re- 
lative sense, that is, if we say that the exchangeable 



SEC. IV.] 



MEASURES OP VALUE. 



69 



value of commodities is determined by the compara- 
tive quantity of labour expended upon each, there 
is no stage of society in which it will be found cor- 
rect. 

In the very earliest periods, when not only land 
was in common, but scarcely any capital was used to 
assist manual exertions, exchanges would be con- 
stantly made with but little reference to the quantity 
of labour which each commodity might have cost 
Ihe greatest part of the objects exchanged would be 
raw products of various kinds, such as game, fish, 
truits, &c. with regard to which, the effects of la- 
bour arc always uncertain. One man might have em- 
ployed five days' labour in procuring an object,which he 
would subsequently be very happy to exchange for 
some other object that might have cost a more 
fortunate labourer only two, or perhaps one day's 
exertion. And this disproportion between the ex- 
changeable value of objects and the labour which they 
had cost in production, would be of perpetual recur- 
rence. 

i^'T 1 ' t] ? erefore > ag^e either with Adam Smith 
or Mr. Ricardo in thinking that, "in that rude state 
of society which precedes both the accumulation of 
stock and the appropriation of land, the proportion 
between the quantities of labour necessary for ac- 
quiring different objects seems to be the only circum- 
stance which can afford any rule for exchanging th^m 
for one another."* The rule, which would be acted 
upon in the exchange of commodities, is unquestion- 
ably that which has been so happily described by Tur- 
got, and which I have stated in the first section of 
this chapter. The results of this rule might or might 
not agree, on an average, with those of the rule 
founded on the quantity of labour which each arti- 
cle had cost; but if they did not, or if commodities 
were found by accident, or the labour employed upon 

* Principles of Poliu Ecoa. c. i. p. 4. 2d edit. 



70 ON THE NATURE ANB [CII. II. 

them was utterly unknown when they were brought to 
market, the society would never be at a loss for a rule 
to determine their exchangeable value ; and it is pro- 
bable that the exchanges actually made in this stage 
of society, would be less frequently proportioned to 
the labour which each object had cost than m any 

other. . 

But in fact there is scarcely any stage of society, 
however barbarous, where the cost of production is 
confined exclusively to labour. At a very early 
period, profits will be found to form an important part 
of this cost, and consequently to enter largely into 
the question of exchangeable value as a necessary 
condition of supply. To make even a bow and ar- 
row, it is obviously necessary that the wood and reed 
should be properly dried and seasoned ; and the time 
that these materials must necessarily be kept by the 
workman before'his work is completed, introduces at 
once a new element into the computation of cost. 
We may estimate the labour employed in any sort ot 
capital just upon the same principle as the labour em- 
ployed in the immediate production of the commodi- 
ty. But the varying quickness of the returns is an 
entirely new element, which has nothing to do with 
the quantity of labour employed upon the capital, 
and yet, in every period of society, the earliest as 
well as the latest, is of the utmost importance in the 
determination of prices. 

The fixed capital necessary to hollow out a canoe, 
may consist of little more than a few stone hatchets 
and shell chissels ; and the labour necessary to make 
them might not add much to the labour subsequently 
employed in the work to which they were applied ; 
but it is likewise necessary that the workman should 
previously cut down the timber, and employ a great 
quantity of labour in various parts of the process, very 
long before there is a possibility of his receiving the 
returns for his exertions, either in the use of the 
canoe, or in the commodities which he might obtain 



SEC. IV.] 



MEASURES OF VALUE. 



71 



in exchange for it ; and during this time he must of 
course advance the whole of his subsistence. But the 
providence, foresight, and postponement of present en- 
joyment for the sake of future benefit and profit, 
which are necessary for this purpose, have always 
been considered as rare qualities in the savage ; and 
it can scarcely admit of a doubt that the articles 
which were of a nature to require this long prepara- 
tion, would be comparatively very scarce, and would 
have a great exchangeable value in proportion to the 
quantity of labour which had been actually employed 
upon them, and on the capital necessary to their pro- 
duction. On this account, I should think it not im- 
probable, that a canoe might, in such a state of so- 
ciety, possess double the exchangeable value of a 
number of deer, to produce which successively in the 
market might have cost precisely the same number of 
days' labour, including the necessary fixed capital of 
the bows and arrows, &c. used for killing them ; and 
the great difference of price in this case would 'arise 
from the circumstance, that the returns for the labour 
of killing each successive deer always came in with- 
in a few days after it was employed, while the re- 
turns for the labour expended on the canoe were de- 
layed perhaps beyond a year. Whatever might be 
the rate of profits, the comparative slowness of these 
returns must tell proportionally on the price of the 
article ; and, as there is reason to think that among 
savages the advances necessary for a work of slow 
returns would be comparatively seldom made, the 
profits of capital would be extremely m>h, and 
the difference of exchangeable value in "different 
commodities which had cost in their production, and 
m the production of the necessary capital, the same 
quantity of labour, would be very great. 

If to this cause of variation we add the exception 
noticed by Mr. Ricardo, arising from the greater or 
less proportion of fixed capital employed in different 



72 ON THE NATUKE AND [CH. M- 

commodities, the effects of which would shew them- 
selves in a very early period of savage life ; it must 
be allowed that the rule which declares " that com- 
modities never vary in value unless a greater or less 
quantity of labour be bestowed on their production, 
cannot possibly, as stated by Mr. Ricardo, be "of 
universal application in the early stages of society. 

In countries advanced in civilization, it is obvious 
that the same causes of variation in the exchangeable 
value of commodities, independently of the labour 
which they mav have cost, must prevail, as in the 
early periods of society, and as might be expected 
some others. Probably indeed the profits of stock 
will not be so high, and consequently neither the va- 
rying proportions of the fixed capitals, nor the slow- 
ness or quickness of the returns, will produce the 
same proportionate difference on prices ; but to make 
up for this, the difference in the quantity of fixed 
capital employed is prodigious, and scarcely the same 
in any two commodities; and the difference in i the 
returns of capital varies sometimes from two or three 
days to two or three years. 

The proposition of Mr. Ricardo, which shews that 
a rise in the price of labour lowers the price of a 
large class of commodities,! has undoubtedly a very 
paradoxical air ; but it is nevertheless true ; and the 
appearance of paradox would vanish if it were stated 

more naturally. 

Mr. Ricardo would certainly allow that the effect 
he contemplates is produced by a fall of profits, which 
he thinks is synonimous with a rise of wages. It is 
not necessary here to enter into the question how far 
he is right in this respect ; but undoubtedly no one 
could have thought the proposition paradoxical, or 
even in the slightest degree improbable, if he had 
stated that a fall of profits would occasion a fall ot 

* Principles of Polit. Econ. p. 31. 2d. edit. 

f Principles of Polit. Econ. pp. 34 and 41. 2d edit. 



SEC. IV.] 



MEASURES OF VALUE. 



73 



price in those commodities, where from the quantity 
of fixed capital employed, the profits of that capital 
had before formed the principal ingredient in the cost 
of production. But this is what he has in substance 
said. In the particular case which he has taken to 
illustrate his proposition, he supposes no other labour 
employed than that which has been applied in the 
construction of the machine, or fixed capital used ; 
and consequently the price of the yearly produce of 
this machine would be formed merely of the ordinary 
profits of the £20,000 which it is supposed to have 
cost, together with a slight addition to replace its 
wear and tear. Now it is quite certain that if, from 
any cause whatever, the ordinary profits of stock 
should fall, the price of the commodity so produced 
would fall. This is sufficiently obvious. But the 
effects arising from an opposite supposition, equally 
consistent with facts, have not been sufficiently con- 
sidered by Mr. Ricardo, and the general result has 
been totally overlooked. 

The state of the case, in a general view of it, seems 
to be this. There is a very large class of commodi- 
ties, in the production of which, owing to the quanti- 
ty of fixed capital used and the long time that elapses 
before the returns of the capital, whether fixed or cir- 
culating, come in, the proportion which the value of 
the capital bears to the value of the labour which it 
yearly employs is, in various degrees, very conside- 
rable. In all these cases it is natural to suppose, that 
the fall of price arising from a fall of profits should, 
in various degrees, more than counterbalance the rise 
of price which would naturally be occasioned by a 
rise in the price of labour ; and consequently on the 
supposition of a rise in the money price of labour and 
a fall in the rate of profits, all these commodities will, 
in various degrees, naturally fall in price. 

On the other hand, there is a large class of com- 
modities, where, from the absence of fixed capital and 
the rapidity of the returns of the circulating capital 

10 



74 ON THE NATURE AND [CH< II. 

from a day to a year, the proportion which the value 
of the capital bears to the quantity of labour which 
it employs is very small. A capital of a hundred 
pounds, which was returned every week, could em- 
ploy as much labour annually as 2,600/. the returns 
of which came in only at the end of the year ; and if 
the capital were returned nearly every day, as it is 
practically, in some few cases, the advance of little 
more than the wages of a man for a single day might 
pay above 300 days' labour in the course of a year. 
Now it is quite evident, that out of the profits of these 
trifling capitals it would not only be absolutely impos- 
sible to take a rise in the price of labour of seven per 
cent., but it would be as impossible to take a rise of h 
per cent. On the first supposition, a rise of only 
h per cent, would, if the price of the produce continu- 
ed the same, absorb more than all the profits of the 
100Z. ; and in the other case much more than all the 
capital advanced. If, therefore, the prices of com- 
modities, where the proportion of labour is very great 
compared with the capital which employs it, do not 
rise upon an advance in the price of labour, the pro- 
duction of such commodities must at once be given 
up. But they certainly will not be given up. Con- 
sequently, upon a rise in the price of labour and fall 
of profits, there will be a large class of commodities 
which will rise in price ; and it cannot be correct to 
say, " that no commodities whatever are raised in ex- 
changeable value merely because wages rise ; they 
are only so raised when more labour is bestowed on 
their production, when wages fall, or when the medi- 
um in which they are estimated falls in value."* It 
is quite certain that merely because wages rise and 
profits fall, all that class of commodities (and it will 
be a large class) will rise in price, where, from the 
smallness of the capital employed, the fall of profits is 
in various degrees more than overbalanced by the rise 
of wages. 

* Rieaalo's Political Economy, p. 41. 2d edit 



SEC. IV.] 



MEASURES OF VALUE. 



75 



There will, however, undoubtedly be a class of 
commodities which, from the effects of these oppo- 
site causes, will remain stationary in price. But from 
the very nature of the proposition, this class must the- 
oretically form little more than a line ; and where, I 
would ask, is this line to be placed ? Mr. Ricardo, in 
order to illustrate his proposition, has placed it, at a 
venture, among those commodities where the advan- 
ces consist solely in the payment of labour, and the 
returns come in exactly in the year.* But the cases 
are extremely rare where the returns of a capital are 
delayed for a year, and yet no part of this capital is 
employed either in the purchase of materials or ma- 
chinery ; and in fact there seems to be no justifiable 
ground for pitching upon this peculiar case as precise- 
ly the one, where, under any variation in the price of 
labour, the price of the commodity remains the same, 
and a rise or fall of wages is exactly compensated by 
a fall or rise of profits. At all events it must be al- 
lowed, that wherever the line may be placed r it can em- 
brace but a very small class of objects ; and upon a 
rise in the price of labour, all the rest will either fall 
or rise in price, although exactly the same quantity 
of labour continues to be employed upon them. 

What then becomes of the doctrine, that the ex- 
changeable value of commodities is proportioned to 
the labour which has been employed upon them ? 
Instead of their remaining of the same value, while the 
same quantity of labour is employed upon them, it 
appears that, from well known causes of constant and 
universal operation, the prices of all commodities, vary 
when the price of labour varies, with very few ex- 
ceptions ; and of what description of commodities 
these few exceptions consist, it is scarcely possible to 
say before hand. 

But the different proportions of fixed capital, and 
the varying quickness of the returns of circulating 
capital, are not the only causes which, in improved 

* Pol it. Eton. p. 33. 2d edit. 



76 ON THE NATURE AND [CH. II* 

countries, prevent the exchangeable value of com- 
modities from being proportioned to the quantity oi 
labour which has been employed upon them. Where 
commerce prevails to any extent, foreign commodities, 
not regulated, it is acknowledged, by the quantity of 
labour and capital employed upon them, form the ma- 
terials of many manufactures. In civilized states 
taxation is every where making considerable changes 
in prices without any reference to labour. And fur- 
ther, where all the land is appropriated, the payment 
of rent is another condition of the supply of most of 
the commodities of home growth and manufacture. 

It is unquestionably true, and it is a truth which in- 
volves very important consequences, that the cost of 
the main vegetable food of civilized and improved 
countries, which requires in its production a conside- 
rable quantity of labour and capital, is resolvable al- 
most entirely into wages and profits, as will be more 
fully explained in the next chapter. But though it 
follows that the price of corn is thus nearly indepen- 
dent of rent, yet as this price, so determined, does ac- 
tually pay rent on the great mass of the lands of the 
country, it is evident that the payment of rent, or, 
what comes to the same thing, of such a price as will 
pay rent, is a necessary condition of the supply of the 
great mass of commodities. 

Adam Smith himself states, that rent " enters into 
the composition of the price of commodities in a dif- 
ferent way from wages and profit." " High or low 
wages or profit (he says) are the causes of high or low 
price ; high or low rent is the effect of it. It is be- 
cause high or low wages and profit must be paid, in 
order to bring a particular commodity to market, that 
its price is high or low. But it is because its price is 
high or low, a great deal more, or very little more, or 
no more, than what is sufficient to pay those wages 
and profits, that it affords a high rent, or a low rent, 
or no rent at all."* In this passage Adam Smith 

* Wealth of Nations, Book I. c. xi. p. 226. 6th Edit. 



SEC. IV.] 



MEASURES OF VALUE. 



7 ; 



distinctly allows that rent is a consequence, not a 
cause of price ; but he evidently does not consider 
this admission as invalidating his general doctrine re- 
specting the component parts of price. Nor in reality 
is it invalidated by this admission. It is still true that 
the cost of the great mass of commodities is resolvable 
into wages, profits, and rent. Some of them may cost 
a considerable quantity of rent, and a small quantity 
of labour and capital ; others a great quantity of la- 
bour and capital, and a small quantity of rent ; and a 
very few may be nearly resolvable into wages and 
profits, or even wages alone. But, as it is known 
that the latter class is confined to a very small propor- 
tion of a country's products, it follows that the pay- 
ment of rent is an absolutely necessary condition of 
the supply of the great mass of commodities, and may 
properly be considered as a component part of price. 
Allowing then that the price of the main vegetable 
food of an improving country is determined by the 
quantity of labour and capital employed to produce it 
under the most unfavourable circumstances, yet if we 
allow, at the same time, that an equal value of pro- 
duce is raised on rich land with little labour and capi- 
tal, we can hardly maintain, with any propriety of 
language, the general proposition that the quantity of 
labour realized in different commodities regulates 
their exchangeable value.* On account of the varie- 
ties of soil alone, constant exchanges are taking place, 
which directly contradict the terms in which the pro- 
position is expressed ; and in whatever way rent may 
be regulated, it is obviously necessary to retain it as an 
ingredient in the costs of production in reference to 
the great mass of commodities ; nor will the proprie- 
ty of thus retaining it be affected by the circum- 
stance, that the rent paid on commodities of the same 
description is variable, and in some few cases little or 
^onc. 



* Ricardo's Polit Econ. c. i. p. 5. 



78 ON THE NATURE AND [oil. ft. 

Under the full admission, therefore, just made, that 
the price of the main vegetable food of an improving 
agricultural country is, in reference to the whole quan- 
tity produced, a necessary price, and coincides with 
what is required to repay the labour and capital 
which is employed under the most unfavourable cir- 
cumstances, and pays little or no rent, we still do not 
seem justified in altering the old language respecting 
the component parts of price, or what I should be 
more disposed to call the necessary conditions of sup- 

But there are some parts of the land and of its pro- 
ducts which have much more the character of a mono- 
poly than the main food of an improving country ; and 
it is universally acknowledged that the exchangeable 
value of commodities which are subjected either to 
strict or partial monopolies cannot be determined by 
the labour employed upon them. The exchangeable 
value of that vast mass of property in this country 
which consists of the houses in all its towns, is greatly 
affected by the strict monopoly of ground rents ; and 
the necessity of paying these rents must affect the 
prices of almost all the goods fabricated in towns. 
And though with regard to the main food of the peo- 
ple it is true that, if rents were given up, an equal 
quantity of corn could not be produced at a less price ; 
yet the same cannot be said of the cattle of the coun- 
try. Of no portion of this species of food is the price 
resolvable into labour and capital alone. 

All cattle pay rent, and in proportion to their value 
not very far from an equal reut. In this respect they 
are essentially different from corn. By means of la- 
bour and dressing, a good crop of corn may be ob- 
tained from a poor soil, and the rent paid may be 
quite trilling compared with the value of the crop ; 
but in uncultivated land the rent must be proportion- 
ed to the value of the crop, and, whether great or 
small per acre, must be a main ingredient in the price 
of the commodity produced. It may require more 



SEC. IV.] MEASURES OF VALUE. 79 

4 

than an hundred acres in the highlands of Scotland to 
rear the same weight of mutton as might have been 
reared on five acres of good pasture ; and something 
no doubt must be allowed for the greater labour of at- 
tendance and the greater risk on a poor soil and in an 
exposed situation ; but independently of this deduc- 
tion, which would probably be inconsiderable, the 
rent paid for the same quantity of mutton would be 
nearly the same. If this rent were greatly diminish- 
ed, there cannot be a doubt that the same quantity of 
cattle might be produced in the market at much low- 
er prices without any diminution of the profits or 
wages of any of the persons concerned ; and conse- 
quently it is impossible to estimate the value of cattle 
by the quantity of labour and capital, and still less 
by the mere quantity of labour which has been ex- 
pended upon them. 

It may possibly be said that although rent is un- 
questionably paid on all and every part of the cattle 
produced in this country ; yet that the rent of uncul- 
tivated land is determined by the price of cattle ; that 
the price of cattle is determined by the cost of pro- 
duction on such good natural pastures or improved 
land as would yield a considerable rent if employed 
m raising corn, because the poor uncultivated lands 
ol a populous country are never sufficient to produce 
all the animal food required ; that the rents of the 
dinerent qualities of land which must thus be devot- 
ed to the rearing of cattle depend upon the price of 
the mam food of the country ; and that the price of 
the main food of the country depends upon the labour 
and capital necessary to produce it on the worst land 
actually so employed. This is to be sure rather a 
circuitous method of proving the intimate connection 
between cattle and labour, and certainly will not jus- 
tity us in saying that the relative value of sheep and 
shirts is proportioned to the comparative quantitv of 
labour expended upon each. 



80 ON THE NATURE AND [CH. II. 

But in fact one of the links in this chain of de- 
pendance will not hold, and the connexion between 
cattle and labour is thus at once broken off. Though 
the price of the main food of a country depends upon 
the labour and capital necessary to produce it on the 
worst land in use ; yet the rent of land, as will be 
shewn more fully in the next chapter, is not regulated 
by the price of produce. Among the events of the 
most common occurrence in all nations, is an improve- 
ment in agriculture which leads to increased produce 
and increased population, and after a time to the cul- 
tivation of naturally poorer land, with the same price 
of produce, the same price of labour, and the same 
rate of profits. But in this case the rents of all the 
old lands in tillage must rise, and with them of course 
the rents of natural pastures and the price of cattle, 
without any change in the price of labour or any 
increased difficulty in producing the means of subsis- 
tence. 

The statement just made applies to many other im- 
portant commodities besides animal food. In the first 
place, it includes wool and raw hides, the materials 
of two most important manufactures ; and applies 
directly to timber and copse wood, both articles of 
great consequence. And secondly, there are some 
products, such as hops, for instance, which cannot be 
grown upon poor soils. Such products it is impossi- 
ble to obtain without paying a rent ; and if this rent 
varies, while the quantity of labour employed in 
the production of a given quantity of corn remains 
the same, there can be no ground whatever for assert- 
ing that the value of such products is regulated by 

labour. 

If it be said that the doctrine which entirely rejects 
rent, and resolves the prices of all commodities into 
wages and profits, never refers to articles which have 
any connexion with monopoly, it may be answered, 
that this exception includes the great mass of the ar- 
ticles with which we are acquainted. The lands 



SEC. IV.] MEASURES OF VALUE. 



81 



which afford the main supply of corn are evidently 
a species of monopoly, though subject to different 
laws and limits from common monopolies ; and even 
the last land taken into cultivation for corn, if it has 
an owner, must pay the small rent which it would 
yield in natural pasture. It has just been shewn that 
monopoly must in the most direct manner affect the 
price of cattle, the other great branch of human food ; 
and with regard to the materials of clothing and lodg- 
ing, there are very few that do not actually pay a 
rent, not only on the great mass of each kind, but on 
those which are grown on the poorest |land actually 
employed for their production. To say that the pri- 
ces of wool, leather, flax, and timber are determined 
by the cost of their production on the land which 
pays no rent, is to refer to a criterion which it is im- 
possible to find. I believe it may be safely asserted 
that there is no portion of wool, leather, flax, and 
timber produced in this country which comes from 
land that can be so described. 

We cannot, therefore, get rid of rent in reference 
to the great mass of commodities. In the case where 
we come the nearest to it, namely, in the production 
of the main food of the country, the attempt to re- 
solve the exchangeable value of all the different por- 
tions of this food into labour and profits alone/in- 
volves a contradiction in terms ; and as no error 
seems to arise from considering rent as a component 
part of price, after we have properly explained its 
origin and progress, it appears to me essential, both 
to correctness of language and correctness of mean- 
ing, to say, that the cost of producing any commodity 
is made up of all the wages, all the profits, and all the 
rent which in the actual circumstances of the society 
are necessary to bring that particular commodity to 
market in the quantity required ; or, in other words, 
that the payment of these expenses is the necessarv 
condition of its supply. 

11 



82 OxN THE NATURE AND [CH. II. 

If we were determined to use only one term, it 
would certainly be more correct to refer to capital 
rather than to labour ; because the advances which 
are called capital generally include the other two. 
The natural or necessary prices of commodities de- 
pend upon the amount of capital which has been em- 
ployed upon them, together with the profits of such 
capital at the ordinary rate during the time that it has 
been employed. But as the amount of capital ad- 
vanced consists of the amount of wages paid from 
the first to the last, together with the amount of rent 
paid either directly to the landlord or in the price of 
raw materials, the use of the three terms seems to be 
decidedly preferable, both as more correct, (rent be- 
ing, in many cases, not an advance of capital,) and 
also as conveying more of the information that is 
wanted. 

But if rent enters into the raw materials of almost 
all manufactures, and of almost all capital, both fixed 
and circulating, the advance necessary to pay it will 
greatly affect the amount of capital employed, and 
combined with the almost infinite varietv that must 
take place in the duration of these advances, will most 
essentially affect that part of price which resolves 
itself into profits. 

Supposing, what is probably not true, that there is 
land in an improved and populous country which pays 
no rent whatever directly ; yet rent will be paid even 
by the cultivator of such land, in the timber which he 
uses for his ploughs, carts, and buildings, in the leath- 
er which he requires for harness, in the meat 
which he consumes in his own family, and in the 
horses which he purchases for tillage. These ad- 
vances, as far as rent alone is concerned, would at 
once prevent the price of the produce from being pro- 
portioned to the quantity of labour employed upon it ; 
and when we add the profits of these advances ac- 
cording to their amount and the periods of their re- 
turn, we must acknowledge that even in the produc- 



SEC. IV.] 



MEASURES OF VALUE. 



83 



tion of corn, where no direct rent is paid, its price 
must be affected by the rent involved in the fixed 
and circulating capital employed in cultivation. 

Under all the variations, therefore, which arise 
from the different proportions of fixed capital employ- 
ed, the different quickness of the returns of the circu- 
lating capital, the quantity of foreign commodities 
used in manufactures, the acknowledged effects of 
taxation, and the almost universal prevalence of rent 
in the actual state of all improved countries, we must 
I think allow that, however curious and desirable it 
may be to know the exact quantity of labour which 
has been employed in the production of each particu- 
lar commodity, it is certainly not this labour which 
determines their relative values in exchange, at the 
same time and at the same place. 

But if, at the same place and at the same time, the 
relative values of commodities are not determined by 
the labour which they have cost in production, it is 
clear that this measure cannot determine their relative 
values at different places and at different times. If, 
in London and at the present moment, other causes 
besides labour concur in regulating the average prices 
of the articles bought and sold, it is quite obvious, 
that because a commodity in India now, or in En- 
gland 500 years ago, cost in its production double the 
quantity of labour which it does in London at pre- 
sent, we could not infer that it was doubly valuable 
in exchange ; nor, if we found from a comparison of 
money prices, that its value in exchange were double 
compared with the mass of commodities, could we 
with any degree of safety infer that it had cost, in its 
production, just double the quantity of labour. 

If, for instance, it were to appear that a yard of 
fine broad cloth in the time of Edward the Third cost 
in its fabrication twenty days' common labour, and in 
modern times only ten, it would follow of course that 
by improvements of different kinds, the facility of 
fabricating broad cloth had been doubled: but to 



84 ON THE NATURE AND [CH. II. 

what extent this circumstance would have affected 
its relative value in exchange, it would not be possi- 
ble to determine without an appeal to facts. The 
alteration in its exchangeable value generally, or in 
reference to the mass of commodities, would of course 
depend upon the proportionate facility or difficulty 
with which other commodities were fabricated, and 
in reference to particular articles, the labour of fabri- 
cating which had remained the same, or was accu- 
rately known, it would still depend upon all those cir- 
cumstances which have already been stated, as pre- 
venting the labour which a commodity has cost in its 
production, from being a correct measure of relative 
value, even at the same place and at the same time. 

In order to shew that the quantity of labour which 
a commodity has cost is a better measure of value 
than the quantity which it will command, Mr. Ricar- 
do makes the supposition, that a given quantity of 
corn might require only half the quantity of labour 
in its production at one time which it might require 
at another and subsequent period, and yet that the 
labourer might be paid in both periods with the same 
quantity of corn ;* in which case, he says, we should 
have an instance of a commodity which had risen to 
double its former exchangeable value, according to 
what he conceives to be the just definition of value, 
although it would command no more labour in ex- 
change than before. 

This supposition, it must be allowed, is a most im- 
probable one. But, supposing such an event to take 
place, it would strikingly exemplify the incorrectness 
of his definition, and shew at once the marked dis- 
tinction which must always exist between cost and 
value. We have here a clear case of increased cost 
in the quantity of labour to a double amount ; yet it 
is a part of the supposition that the commodity, which 
has been thus greatly increased in the cost of its pro- 

* Principles of Political Economy, chap. i. p. 8. 2d edit. 



SEC. IV.] 



MEASURES OF VALUE. 



85 



duction, will not purchase more of that article, which 
is, beyond comparison, the most extensive and the 
most important of all the objects which are offered in 
exchange, namely, labour. This instance shews at 
once that the quantity of labour which a commodity 
has cost in its production, is not a measure of its 
value in exchange. 

It will be most readily allowed that the labour em- 
ployed in the production of a commodity, including 
the labour employed in the production of the neces- 
sary capital, is the principal ingredient among the 
component parts of price, and, other things being 
equal, will determine the relative value of all the 
commodities in the same country, or, more correctly 
speaking, in the same place. But, in looking back 
to any past period, we should ascertain the relative 
values of commodities at once, and with much more 
accuracy, by collecting their prices in the money of 
the time. For this purpose, therefore, an inquiry 
into the quantity of labour which each commodity 
had cost, would be of no use. And if we were to 
infer that, because a particular commodity 300 years 
ago had cost ten days' labour and now costs twenty, 
its exchangeable value had doubled, we should cer- 
tainly run the risk of drawing a conclusion most ex- 
tremely wide of the truth. 

It appears then, that the quantity of labour which 
a commodity has cost in its production, is neither a 
correct measure of relative value at the same time 
and at the same place, nor a measure of real value in 
exchange, as before defined, in different countries and 
at different periods. 






r 



86 



ON THE NATURE AND [CH. II. 



SECTION V. 



Of Money, when uniform in its cost, considered as a Measure 

of Value. 

Upon the principle, that the labour which a commo- 
dity has cost in its production, is at once a measure 
of real and relative value, it has been thought, that it 
there were any article to be found which would at 
all times cost the same quantity of labour in its pro- 
duction, it might be used as an accurate and standard 
measure of value* It is acknowledged that the pre- 
cious metals do not possess this quality, i he world 
has been at different periods supplied from mines of 
different degrees of fertility. This difference of fer- 
tility necessarily implies that different quantities of 
labour are at different times required in the production 
of the same quantity of metal ; and the different de- 
grees of skill applied at different periods in the work- 
ing of mines, must be an additional source of variable- 
nets in the quantity of labour which a given weight 
of coin has cost to bring it to market. 

It may be curious however to consider how tar the 
precious metals would be an accurate measure of the 
quantities of labour employed upon each commodity, 
even if these sources of variableness were removed, 
and if it were really true that given quantities ot 
the metals always required in their production the 
same quantity of labour. 

It is an acknowledged truth that the precious me- 
tals as thev are at present procured and distributed, 
are ' an accurate measure of exchangeable value, at 
the same time and in the same place ; and it is cer- 
tain that the supnosition here made would not des- 
troy, or in any respect impair, this quality which they 
now possess. But it was shewn in the last section 

* Ricardo on the Principles of Politic! Economy and Taxation, eh. i. p. 24. 2d 
edition. 



SEC. V.] 



MEASURES OF VALUE. 



87 



that the exchangeable value of commodities is scarce- 
ly ever proportioned to the quantity of labour employ- 
ed upon them. It follows therefore necessarily that 
the money prices of commodities could not, even on 
the supposition here made, represent the quantity of 
labour employed upon them. 

There is indeed no supposition which we can make 
respecting the mode of procuring the precious metals, 
which can ever render the prices of commodities a cor- 
rect measure of the quantity of labour which they have 
severally cost. These prices will always be found to 
diner at least as much from the quantity of labour 
employed upon each commodity, as the quantity of 
labour does from their exchangeable values. To 
shew this, let us suppose ; first, that the precious me- 
tals require for their production at the mines which 
yield no rent, a certain quantity of fixed and circula- 
ting capital employed for a certain time. In this case. 
it follows from the reasonings of the preceding section 
and even from the admissions of Mr. Ricardo, that 
none of the commodities which would Exchange for 
a given quantity of silver, would contain the same 
quantity of labour as that silver, except those which 
had been produced, not only by the same quantity of 
labour but by the same quantities of the two kinds of 
capital employed for the same time and in the same 
proportions : and, in the case of a rise in the price of 
labour, all commodities which still contained the same 
quantity of labour, would alter in price, except those 
very tew which were circumstanced exactly in the 
same manner with regard to the capitals by which 
they were produced, as the precious metals. 

Let us suppose, secondly, that the production of the 
precious metals required no fixed capital, but merely 
adva nc e S ln the pajment f manua , labour for a J 

1 his case is so very unusual, that I should almost 
doubt whether any commodities could be found which 
would at once be of the same exchangeable value, 
and contain the same quantity of labour as a given 



gg ON THE NATURE AND [CH. II. 

portion of the precious metals ; and of course upon a 
rise in the price of labour, almost all commodities 
would rise or fall in price. 

Let us suppose, thirdly, that labour alone, without 
anv advances above the food of a day, were sufficient 
Tobtam the precious metals, that is, that half an 
ounce of silver and A of an ounce of gold could al- 
ways, on an average, be found by a day's search on 
the sea-shore. In this case, it is obvious that every 
commodity, which had required in its production any 
sort or quantity of capital beyond the advance of ne- 
cessaries for a day, would differ in price from any por- 
tion of gold or silver which had cost the same quanti- 
ty of labour. With regard to the effects of a rise m 
the price of labour, they cannot be the subject of oui 
consideration, as it is evident that no nse in the price 
of labour could take place on the present supposition. 
A day's labour must always remain of the same mo- 
ney price, and corn could only rise as far as the d,mi- 
S in'the necessaries of the labourer JJ.W J^w. 
Still, however, though the money price of. he , abour 
er could not rise, the rate of profits might fall , and 
on a fall in the rate of profits, every commodity would 

"^Xrrft ^'suppositions, the operation 
of the causes mentioned in the last section would so 
modify the prices of commodities, that we should be 
Stele abkas we are at present, to infer from .these 
relative prices, the relative proportions of laboui em- 
ploved upon each commodity. 

P But independently of the causes here adverted to, 
the precious metals have other sources of variation 
pecuuar to them. On account of their _dura . ty, 
they conform themselves slowly, and with difficulty, 
to the varieties in the qualities of other commodi.es, 
and the varying facilities which attend their produc- 

ti °The market prices of gold and silver depend upon 
the quantity of them in the market compared with 



3EC. V.] 



MEASURES OF VALUE. 



89 



the demand ; and this quantity has been in part pro- 
duced by the accumulation of hundreds of years, and 
is but slowly affected by the annual supply from the 
mines. 

It is justly stated by Mr. Ricardo* that the agree- 
ment of the market and natural prices of all commo- 
dities, depends at all times upon the facility with ' 
which the supply can be increased or diminished, and 
he particularly notices gold, or the precious metals, as 
among the commodities where this effect cannot be 
speedily produced. Consequently if by great and 
sudden improvements in machinery, both in manu- 
factures and agriculture, the facility of production 
were generally increased, and the wants of the popu- 
lation were supplied with much less labour, the value 
of the precious metals compared with commodities 
ought greatly to rise ; but, as they could not in a short 
time be adequately diminished in quantity, the prices 
of commodities would cease to represent the quantity 
of labour employed upon them. 

Another source of variation peculiar to the precious 
metals, would be the use that is made of them in 
foreign commerce; and unless this use were given 
up, and the exportation and importation of them were 
prohibited, it would unquestionably answer to some 
countries possessing peculiar advantages in their ex- 
portable commodities, to buy their gold and silver 
abroad rather than procure them at home. At this pre- 
sent moment, I believe it is unquestionably true that 
England purchases the precious metals with less la- 
bour than is applied to obtain them directly from the 
mines of Mexico. But if they could be imported by 
some countries from abroad with less labour than they 
could be obtained at home, it would answer to other 
C0 , un [ rie L s t0 export them in exchange for commodities, 
which they either could not produce on their own 
soil, or could obtain cheaper elsewhere. And thus, 

• Principle of Political Economy and Taxation, rh. Jtiii. p. 2:>*. 

12 



90 ON THE NATURE AND [CH. If* 

in reference to the relative value of commodities both 
in different countries at the same period, and in the 
same country at different periods, it is obvious that 
the prices in money might be subject to considerable 
variations, without being accompanied by any propor- 
tionate variations in the quantities of labour which 

they had cost. 

The objections hitherto considered in this and the 
preceding sections, are some of those which present 
themselves upon the supposition that each nation pos- 
sessed mines, or even could procure at home the pre- 
cious metals at all times with the same quantity of la- 
bour without capital ; but these, it must be allowed, 
are extravagant hypotheses. If however we were 
to assume the more natural one, of the mines, where 
ever they are, and in all ages, costing always the 
same quantity of labour and capital in the working, 
we should see immediately from the present distribu- 
tion of the precious metals, how little comparatively 
they could be depended upon as measuring, in differ- 
ent countries and at different times, the quantities of 
labour which commodities have cost. 

If indeed the fertility of the mines were always 
the same, we should certainly get rid of that source 
of variation which arises from the existing contrary 
quality, and of the effects of such a discovery as that 
of the American mines. But other great and obvious 
sources of variation would remain. The uniform 
fertility of the mines would not essentially alter the 
proportions in which the precious metals would be dis- 
tributed to different countries ; and the great differ- 
ences, which are now known to take place in their 
value in different places, when compared with com 
and labour, would probably continue nearly the 

same. . , 

According to all the accounts we have received 
of prices in Bengal, a given quantity of silver will 
there represent or command six or eight times more 
labour and provisions than in England. In all parts 



StEC. V.] 



MEASURES OF VALUE. 



91 



of the world articles of equal money prices exchange 
for each other. It will consequently happen that, in 
the commerce carried on between the two coun- 
tries, the product of a day's English labour must ex- 
change for the product of five or six days of Indian 
labour, after making a sufficient allowance for the dif- 
ference of profits. 

Perhaps it will be said that the high comparative 
value of silver in India arises mainly from the effects 
of the discovery of the American mines not having 
yet been adequately communicated to this part of the 
world : but it must be recollected that the discovery 
is now of long standing ; and that the difference in 
the relative value of gold and silver, compared with 
their values in Europe, which most clearly indicated 
an incomplete communication, is now at an end. I 
am disposed to think therefore, that the high value 
of silver in India arises mainly from other causes. 
But at all events the difference is now so enormous 
as to allow of a great abatement, and yet to leave it 
very considerable. 

It is not however necessary to go to India in order 
to find similar differences in the value of the precious 
metals, though not perhaps so great. Russia, Poland, 
Germany, France, Flanders, and indeed almost all 
the countries in Europe, present instances of great 
variations in the quantity of labour and provisions 
which can be purchased by a given quantity of silver. 
Vet the relative values of the precious metals in these 
countries must be very nearly the same as they would 
be, if the American mines had been at all times of a 
uniform fertility : and consequently, by their present 
relative values, we may judge how little dependence 
could be placed on a coincidence in different coun- 
tries between the money prices of commodities and 
the quantities of labour which they had cost, even on 
the supposition that money was always obtained from 
the mines in America by the same quantity of labour 
and capital. 



92 ON THE NATtJRE AND [CH. II. 

But if we are not fully satisfied with this kind of 
reference to experience, it is obvious that the same 
conclusion follows inevitably from theory. In those 
countries where the precious metals are necessarily 
purchased, no plausible reason can be assigned why 
the quantity of them should be in proportion to the 
difficulty of producing the articles with which they 
are purchased. 

When the English and Indian muslins appear in 
the German markets, their relative prices will be de- 
termined solely by their relative qu ilities, without the 
slightest reference to the very different quantities o£ 
human labour which they may have cost ; and the 
circumstance that in the fabrication of the Indian 
muslins five or six times more labour has been em- 
ployed than in the English, will not enable them to 
command greater returns of money to India. 

In the ports of Europe no merchants are to be 
found who would be disposed to give mofe money 
for Swedish wheat, than Russian, Polish or Ame- 
rican, of the same quality, merely because more la- 
bour had been employed in the cultivation of it, on 
account of its being grown on a more barren soil, 
If India and Sweden therefore had no other means 
of buying silver in Europe than by the export of 
muslins and corn, it would be absolutely impossible 
for them to circulate their commodities at a money 
price, compared with other countries, proportioned to 
the relative difficulty with which they were produced, 
or the quantity of labour which had been employed 
upon them. It is indeed universally allowed, that 
the power of purchasing foreign commodities of all 
kinds depends upon the relative cheapness, not the re- 
lative dearness, of the articles that can be exported ; 
and therefore, although the actual currency of an 
individual country, other circumstances being nearly 
equal, may be distributed among the different com- 
modities bought and sold, according to the quantity 
of labour which they have severally cost, the suppo- 



3EC. V.] 



MEASURES OF VALUE. 



93 



sit ion that the same sort of distribution would take 
place in different countries, involves a contradiction 
of the first principles of commercial intercourse.* 

It appears then that no sort of regularity in the 
production of the precious metals, not even if all 
countries possessed mines of their own, and still less 
if the great majority were obliged to purchase their 
money from others, can possibly render the money 
prices of commodities a correct measure of the quan- 
tity of labour which has been employed upon them, 
either in the same or different countries, or at the 
same or different periods. 

How far the precious metals so circumstanced, 
may be a good measure of the exchangeable value 
of commodities, though not of the labour which has 
been employed upon them, is quite another question. 
It has been repeatedly stated that the precious metals, 
in whatever way they may be obtained, are a correct 
measure of exchangeable value at the same time and 
place. And certainly the less subject to variation are 
the modes of procuring them, the more they will ap- 
proach to a measure of exchangeable value at diffe- 
rent times and in different places. 

If, indeed, they were procured according to one 
of the suppositions made in this section, that is. if 
each nation could at all times obtain them by the 
same quantity of labour without any advances of 
capital, then with the exception of the temporary dis- 
turbances occasioned by foreign commerce and the 
sudden invention of machinery, the exchangeable 
value in money in reference to the labour which it 
would command, would be the same in all countries 
and at all times ; and the specific reason why the 
precious metals would in this case approach near to a 
correct measure of real value in exchange is, that it is 
the only supposition in which their cost in labour can 

♦Mr. Ricardo very justly states that, even on the supposition which he has 
made respecting the precious metals, the foreign interchange of commodities is not 
determined by the quantity of labour which they have relatively cost. 



94 ON THE NATURE AND [CH. II. 

ever be the same as their exchangeable value in la- 
bour. In the case supposed, money would certainly 
be of a uniform value. It would at all times both 
cost the same quantity of labour and command the 
same quantity ; but we have seen that, in reference to 
those commodities where any sort of capital was 
used, their values, compared either with the precious 
metals, or each other, could never be proportioned to 
the labour which they had cost. 



SECTION VI. 



Of the Labour which a Commodity will command, considered 
as a Measure of real Value in Exchange. 

When we consider labour as a measure of value in 
the sense in which it is most frequently applied by 
Adam Smith, that is, when the value of an object is 
estimated by the quantity of labour of a given de- 
scription (common day-labour, for instance) which it 
can command, it will appear to be unquestionably the 
best of any one commodity, and to unite, more nearly 
than any other, the qualities of a real and nominal 
measure of exchangeable value. 

In the first place, in looking for any one object as 
a measure of exchangeable value, our attention would 
naturally be directed to that which was most exten- 
sively the subject of exchange. Now of all objects 
it cannot be disputed, that by far the greatest mass of 
value is given in exchange for labour either produc- 
tive or unproductive. 

Secondly, the value of commodities, in exchange 
for labour, can alone express the degree in which 
they are suited to the wants and tastes of society, and 
the degree of abundance in which they are supplied, 
compared with the desires and numbers of those who 



SEC. VI.] MEASURES OF VALUE. 95 

are to consume them. By improvements in machi- 
nery, cloth, silks, cottons, hats, shoes, money, and 
even corn, for some years might all be very greatly 
increased in quantity at the same time. Yet while 
this remarkable alteration had taken place in these 
commodities, the value of any one of them in ex- 
change for any other, or even compared with the 
mass of the others collectively, might remain exactly 
the same. It is obvious therefore that, in order to 
express the important effects arising from facility of 
production, we must take into our consideration either 
the quantity of labour which commodities have cost, 
or the quantities of labour which they will command. 
But it was shewn in the last two sections, that the 
quantity of labour, which commodities have cost, 
never approaches to a correct measure of exchange- 
able value, even at the same time and place. Conse- 
quently, our attention is naturally directed to the la- 
bour which commodities will command. 

Thirdly, the accumulation of capital, and its effi- 
ciency in the increase of wealth and population, de- 
pends almost entirely upon its power of setting labour 
to work ; or, in other words, upon its power of com- 
manding labour. No plenty of commodities can oc- 
casion a real and permanent increase of capital, if they 
are of such a nature, or have fallen so much in value, 
that they will not command more labour than they 
have cost. When this happens from permanent cau- 
ses, a final stop is put to accumulation ; when it hap- 
pens for a time only, a temporary stop to accumula- 
tion takes place, and population is in both cases af- 
fected accordingly. As it appears then that the great 
stimulus to production depends mainly upon the 
power of commodities to command labour, and es- 
pecially to command a greater quantity of labour than 
they have cost, we are naturally led to consider this 
power of commanding labour as of the utmost im- 
portance in an estimate of the exchangeable value of 
commodities. 



96 OTf THE NATURE AND [CH. II. 

These are some of the general considerations 
which, in a search for a measure of value, would di- 
rect our first attention to the labour which commodi- 
ties will command ; and a more particular considera- 
tion of the qualities of this measure will convince us 
that no one other object is equally adapted to the 
purpose. 

It is universally allowed that, in the same place, 
and within moderately short periods of time, the pre- 
cious metals are an unexceptionable measure of value; 
but whatever is true of the precious metals with re- 
spect to nominal prices, is true of labour applied in 
the way proposed. 

It is obvious, for instance, that, in the same place 
and at the same time, the different quantities of day- 
labour which different commodities can command, 
will be exactly in proportion to their relative values 
in exchange ; and, if any two of them will purchase 
the same quantity of labour of the same description, 
they will invariably exchange for each other. 

The merchant might safely regulate his dealings, 
and estimate his commercial profits by the excess of 
the quantity of labour which his imports would com- 
mand, compared with his exports. Whether the va- 
lue of a commodity had arisen from a strict or partial 
monopoly ; whether it was occasioned principally by 
the scarcity of the raw material, the peculiar sort of 
labour required in its construction, or unusually high 
profits ; whether its value had been increased by an 
increased cost of production, or diminished by the ap- 
plication of machinery ; whether its value at the mo- 
ment depended chiefly upon permanent, or upon tem- 
porary causes ; — in all cases, and under all circum- 
stances, the quantity of labour which it will command, 
or, what comes to the same thing, the quantity of la- 
bour or labour's worth, which people will give to ob- 
tain it, will be a very exact measure of its exchangea- 
ble value. In short, this measure will, in the same 
place, and at the same time, exactly accord with the 



SEC. VI.] MEASURES OF VALUE. 97 

nominal prices of commodities, with this great ad- 
vantage in its favour, that it will serve to explain ver} 
accurately and usefully all variations of value, with- 
out reference to a circulating medium. 

It may be said, perhaps, that in the same place, 
and at the same time exactly, almost every commodi- 
ty may be considered as an accurate measure of the 
relative value of others, and that what has just been 
said of labour may be said of cloth, cotton, iron, or 
any other article. Any two commodities which at 
the same time and in the same place would purchase 
or command the same quantity of cloth, cotton or 
iron, of a given quality, would have the same relative 
value, or would exchange for each other. This is no 
doubt true, if we take the same time precisely ; but 
not, if a moderate latitude be allowed, such as may be 
allowed in the case of labour or of the precious metals. 
Cloth, cotton, iron and similar commodities, are much 
more exposed to sudden changes of value, both from 
the variations of demand, and the influence of ma- 
chinery and other causes, than labour. Day-labour, 
taking the average of summer and winter, is the most 
steady of all exchangeable articles ; and the merchant 
who, in a foreign, venture, the returns of which were 
slow, was sure of gaining fifteen per cent, estimated 
in labour, would be much more secure of finally gain- 
ing fifteen per cent, of real profits, than he, who could 
only be sure of gaining fifteen per cent, estimated in 
cloth, cotton, iron, or even money. 

While labour thus constitutes an accurate measure 
of value in the same place, and within short periods of 
time, it approaches the nearest of any one commodity 
to such a measure, when applied to different places 
aiid distant periods of time. 

Adam Smith has considered labour in the sense 
here understood as so good a measure of corn, or, 
what comes to the same thing, he has considered corn 
as so good a measure of labour, that in his Digression 
on the value of silver during the four last centuries, 

13 






98 ON THE NATURE AND [cH. II 

he has actually substituted corn for labour, and drawn 
the same conclusions from his inquiry, as if the one 
were always an accurate measure of the other. 

In doing this I think he has fallen into an impor- 
tant error, and drawn inferences inconsistent with his 
own general principles. At the same time, we must 
allow that, from century to century, and in different 
and distant countries where the precious metals great- 
ly vary in value, corn, as being the principal necessa- 
ry of life, may fairly be considered as the best mea- 
sure of the real exchangeable value of labour ; and 
consequently the power of a commodity to command 
labour will, at distant times and in different countries, 
be the best criterion of its power of commanding the 
first necessary of life — corn. 

With regard to the other necessaries and conveni- 
ences of life, they must in general be allowed to de- 
pend still more upon labour than corn, because in 
general more labour is employed upon them after they 
come from the soil. And as, all other things being 
equal, the quantity of labour which a commodity will 
command will be in proportion to the quantity which 
it has cost ; we may fairly presume that the influence 
of the different quantities of labour which a commodi- 
ty may have cost in its production, will be sufficiently 
taken into consideration in this estimate of value, to- 
gether with the further consideration of all those cir- 
cumstances, besides the labour actually employed on 
them in which they are not equal. The great pre- 
eminence of that measure of value, which consists 
in the quantity of labour which a commodity will 
command, over that which consists in the quantity of 
labour which has been actually employed about it, 
is, that while the latter involves merely one cause of 
exchangeable value, though in general the most con- 
siderable one ; the former, in addition to this cause, 
involves all the different circumstances which influ- 
ence the rates at which commodities are actually ex- 
change for each other. 



SEC. VI.] MEASURES OF VALUE. 99 

It is evident that no commodity can be a good 
measure of real value in exchange in different places 
and at distant periods, which is not at the same time 
a good measure of nominal value in these places and 
at these distant periods ; and in this respect it must be 
allowed, that the quantity of common labour that an 
article will command, which necessarily takes into 
account every cause that influences exchangeable 
value, is an unexceptionable measure. 

It should be further remarked, that although in dif- 
ferent countries and at distant periods, the same 
quantity of labour will command very different quan- 
tities of corn — the first necessary of life ; yet in the 
progress of improvement and civilization it generally 
happens, that when labour commands the smallest 
quantity of food, it commands the greatest quantity of 
other commodities, and when it commands the great- 
est quantity of food it commands the smallest quanti- 
ty of other necessaries and conveniences ; so that 
when, in two countries, or in two periods differently 
advanced in improvement, two objects command the 
same quantity of labour, they will often command 
nearly the same quantity of the necessaries and con- 
veniences of life, although they may command diffe- 
rent quantities of corn. 

It must be allowed then that, of any one commodi- 
ty, the quantity of common day-labour which any 
article will command, appears to approach the nearest 
to a measure of real value in exchange. 

But still, labour, like all other commodities, varies 
from its plenty or scarcity compared with the de- 
mand for it, and, at different times and in different 
countries, commands very different quantities of the 
Jirst necessary of life ; and further, from the different 
degrees of skill and of assistance from machinery 
with which labour is applied, the products of labour 
are not in proportion to the quantity exerted. Con- 
sequently, labour, in any sense in which the term can 



100 ON THE NATURE AND [CH. II. 

be applied, cannot be considered as an accurate and 
standard measure of real value in exchange. And if 
the labour which a commodity will command cannot 
be considered in this light, there is certainly no other 
quarter in which we can seek for such a measure 
with any prospect of success. 



SECTION VII. 

Of a Mean between Corn and Labour considered as a Mea- 
sure of Real Value in Exchange. 

No one commodity then, it appears, can justly be 
considered as a standard measure of real value in ex- 
change ; and such an estimate of the comparative 
prices of all commodities as would determine the 
command of any one in particular over the necessa- 
ries, conveniences, and amusements of life, including 
labour, would not only be too difficult and laborious 
for use, but generally quite impracticable. Two ob- 
jects, however, might, in some cases, be a better 
measure of real value in exchange than one alone, 
and yet be sufficiently manageable for practical ap- 
plication. 

A certain quantity of corn of a given quality, on 
account of its capacity of supporting a certain num- 
ber of human beings, lias always a definite and inva- 
riable value in use; but both its real and nominal 
value in exchange is subject to considerable varia- 
tions, not only from year to year, but from century to 
century. It is found by experience that population 
and cultivation, notwithstanding their mutual depen- 
dence on each other, do not always proceed with 
equal steps, but are subject to marked alternations in 
the velocity of their movements. Exclusive of annua! 



SEC. VII.] MEASURES OF VALUE. 101 

variations, it appears that corn sometimes remains 
dear, compared with labour and other commodities, 
for many years together, and at other times remains 
cheap, compared with the same objects, for similar 
periods. At these different periods, a bushel of corn 
will command very different quantities of labour and 
other commodities. In the reign of Henry VII., at 
the end of the 15th and beginning of the 16th cen- 
turies, it appears, from the statute price of labour and 
the average price of wheat, that half a bushel of this 
grain would purchase but little more than a day's 
common labour ; and, of course, but a small quantity 
of those commodities in the production of which 
much labour is necessary. A century afterwards, in 
the latter part of the reign of Elizabeth, half a bushel 
of wheat would purchase three days' common labour, 
and, of course, a considerable quantity comparatively 
of those commodities on which labour is employed. 
Consequently, from century to century as well as 
from year to year, a given quantity of corn appears 
to measure very imperfectly the quantity of the ne- 
cessaries, conveniences, and amusements of life, which 
any particular commodity will command in exchange. 
The same observation will hold good if we take 
day labour, the measure proposed by Adam Smith ; 
and the same period in our history will illustrate the 
variation from century to century of this measure. 
In the reign of Henry VII. a day's labour, according 
to the former statement, would purchase nearly half 
a bushel of wheat, the chief necessary of life, and 
consequently the chief article in the general estimate 
of real value in exchange. A century afterwards, a 
day's labour would only purchase one-sixth of a 
bushel, — a most prodigious difference in this main 
article. And though it may be presumed that a day's 
labour in both periods would purchase much more 
nearly the same quantity of those articles where la- 
bour enters as a principal ingredient, than of corn, 
yet the variations in its command over the first neces-' 



102 ON THE NATURE AND [CH. II. 

sary of life, at different periods, must alone disqualify 
it from being an accurate measure of real value in ex- 
change from century to century. 

Though neither of these two objects, however, ta- 
ken singly, can be considered as a satisfactory mea- 
sure of value, yet by combining the two, we may 
perhaps approach to greater accuracy. 

When corn compared with labour is dear, labour 
compared with corn must necessarily be cheap. At 
the period that a given quantity of corn will command 
the greatest quantity of the necessaries, conveniences, 
and amusements of life, a given quantity of labour 
will always command the smallest quantity of such 
objects ; and at the period when corn commands the 
smallest, labour will command the greatest quantity 

of them. 

If, then, we take a mean between the two, we 
shall evidently have a measure corrected by the con- 
temporary variations of each in opposite directions, 
and likely to represent more nearly than either the 
same quantity of the necessaries, conveniences, and 
amusements of life, at the most distant periods, and 
under all the varying circumstances to which the pro- 
gress of population and cultivation is subject. 

For this purpose, however, it is necessary that we 
should fix upon some measure of corn which may be 
considered, in respect of quantity, as an equivalent 
to a day's labour ; and perhaps in this country, a peck 
of wheat, which is about the average daily earnings 
of a good labourer in good times, may be sufficiently 
accurate for the object proposed. Any commodity 
therefore which, at different periods, will purchase the 
same number of days' labour and of pecks of wheat, 
or parts of them, each taken in equal proportions, 
may be considered, upon this principle, as command- 
ing pretty nearly the same quantity of the necessaries, 
conveniences, and amusements of life ; and, conse- 
quently, as preserving pretty nearly its real value in 
exchange at different periods. And any commodity 



SEC. VII.] MEASURES OF VALUE. 108 

which at different periods is found to purchase dif- 
ferent quantities of corn and labour thus taken, will 
evidently have varied compared with a measure sub- 
ject to but little variation, and consequently may be 
presumed to have varied proportionably in its real 
value in exchange. 

In estimating the real value in exchange of com- 
modities in different countries, regard should be had 
to the kind of food consumed by the labouring clas- 
ses ; and the general rule should be to compare them 
in each country with a day's labour, and a quantity 
of the prevailing sort of grain, equal to the average 
daily earnings of a good labourer. Thus, if the mo- 
ney price of a commodity in England would pur- 
chase five days' labour and five pecks of corn, and 
the money price of a commodity in Bengal would 
purchase five days' labour, and iive times the quanti- 
ty of rice usually earned in a day by a good labour- 
er, according to an average of a very considera- 
ble period, these commodities might be considered 
in each country as of equal real value in exchange ; 
and the difference in their money values would ex- 
press pretty nearly the different values of silver in 
England and Bengal. 

The principal defect of the measure here proposed, 
arises from the effect of capital, machinery and the 
division of labour in varying, in different countries 
and at different periods, the results of day-labour and 
the prices of manufactured commodities: but these 
varying results no approximation hitherto suggested 
has ever pretended to estimate ; and, in fact, they re- 
late rather to riches than to exchangeable value, 
which, though nearly connected, are not always the 
same ; and on this account, in an estimate of value, 
the cheapness arising from skill and machinery may 
without much error be neglected. 

i i. Mr ' ? icardo asks " wh Y should gold, or corn, or 
labour be the standard measure of value, more than 
coals or iron, more than cloth, soap, candles, and the 



104 ON THE NATURE AND [CH. 11. 

other necessaries of the labourer ? Why, in short, 
should any commodity, or all commodities together, 
be the standard, when such a standard is itself sub- 
ject to fluctuations in value ?"* I trust that the ques- 
tion here put has been satisfactorily answered in the 
course of this inquiry into the nature and measures of 
value. And I will only add here that some one, or 
more, or all commodities together, must of necessity 
be taken to express exchangeable value, because they 
include every thing that can be given in exchange. 
Yet a measure of exchangeable value thus formed, it 
is acknowledged, is imperfect ; and we should certain- 
ly have been obliged to Mr. Ricardo if he had sub- 
stituted a better. But what measure has he propos- 
ed to substitute ? The sacrifice of toil and labour 
made in the production of a commodity ; that is, its 
cost, or, more properly speaking, a portion of its cost, 
from which its value in exchange is practically found, 
under different circumstances, to vary in almost every 
decree. Cost and value are always essentially dif- 
ferent. A commodity, the cost of which has doubled, 
may be worth in exchangeable value no more than 
before, if other commodities have likewise doubled. 
When the cost of commodities however is estimated 
upon the principles of Adam Smith, their money cost, 
and average money value will generally meet. But 
when cost is estimated upon the principles ot Mr. Ki- 
cardo, by the quantity of labour applied, the labour 
cost and labour value scarcely ever agree. Wherever 
there are profits, (and the cases are very rare indeed 
in which there are none,) the value of a commodity 
in exchange for labour is uniformly greater than the 
labour which has been employed upon it. 

We have therefore to choose between an imperfect 
measure of exchangeable value, and one that is neces- 
sarily and fundamentally erroneous. 

* PriBc. of Polit. Ecoo. c xx. p. 343. 2d edit. 



SEC. VII.] 



MEASURES OF VALUE. 



105 



If Mr. Ricardo says that by value, when he uses 
it alone, he does not mean exchangeable value, then 
he has certainly led us into a great error in many 
parts of his work ; and has finally left us without sub- 
stituting any measure of exchangeable value for the 
one to which he objects. There never was any dif- 
ficulty in finding a measure of cost, or indeed of value, 
if we define it to be cost. The difficulty is, to find 
a measure of real value in exchange, in contradistinc- 
tion to nominal value or price. There is no question 
as to an accurate standard, which is justly considered 
as unattainable. But, of all the articles given in 
exchange, labour is, beyond comparison, the largest 
and most important ; and next to it stands corn. The 
reason, why corn should be preferred to coals or iron, 
is surely very intelligible. The same reason combin- 
ed with others holds for preferring labour to corn. 
And the reasons given in this section are, I trust, suf- 
ficient for preferring, in some cases, a mean between 
corn and labour to either of them taken separately. 
Where corn is not one of the articles to be measured, 
as in the case of an estimate of the value of the pre- 
cious metals, or any particular commodity, a mean 
between corn and labour is certainly to be preferred 
to labour alone ; but where corn is one of the main 
articles to be measured, as in an estimate of the ex- 
changeable value of the whole produce of a country, 
the command of such produce over domestic and 
foreign labour is still the best criterion to which we 
can refer. 

14 



( 106 ) 



CHAPTER HI. 

OF THE RENT OF LAND. 

SECTION 1. 

Of the Nature and Causes of Rent. 

The rent of land may be defined to be that portion 
of the value of the whole produce which remains to 
the owner of the land, after all the out-goings belong- 
ing to its cultivation, of whatever kind, have been 
paid, including the profits of the capital employed, es- 
timated according to the usual and ordinary rate of 
the profits of agricultural stock at the time being. 

It sometimes happens that, from accidental and 
temporary circumstances, the farmer pays more, or 
less, than this ; but this is the point towards which 
the actual rents paid are constantly gravitating, and 
which is therefore always referred to when the term 
is used in a general sense. 

Rent then being the excess of price above what is 
necessary to pay the wages of the labour and the pro- 
fits of the capital employed in cultivation, the first 
object which presents itself for inquiry, is, t\ie cause 
or causes of this excess of price. 

After very careful and repeated revisions of the 
subject, I do not find myself able to agree entirely in 
the view taken of it, either by Adam Smith, or the 
Economists ; and still less, by some more modern 

writers. 

, Almost all these writers appear to me to consider 
rent as too nearly resembling, in its nature, and the 
laws by which it is governed, that excess of price 
above the costs of production, which is the character- 
istic of a common monopoly. 



SEC. I.] OF THE RENT OF LAND. 107 

Adam Smith, though in some parts of the eleventh 
chapter of his first book he contemplates rent quite 
in its true light,* and has interspersed through his 
work, more just observations on the subject than any 
other writer, has not explained the most essential 
cause of the high price of raw produce with sufficient 
distinctness, though he often touches on it ; and by 
applying occasionally the term monopoly to the rent of 
land, without stopping to mark its more radical pecu- 
liarities, he leaves the reader without a definite im- 
pression of the real difference between the cause of 
the high price of the necessaries of life, and of mono- 
polized commodities. 

Some of the views which the Economists have 
taken of the nature of rent appear to me also to be 
quite just ; but they have mixed them with so much 
error, and have drawn such unwarranted inferences 
from them, that what is true in their doctrines has 
produced little effect. Their great practical conclu- 
sion, namely, the propriety of taxing exclusively the 
neat rents of the landlords, evidently depends upon 
their considering these rents as completely disposeable, 
like that excess of price above the cost of production, 
which distinguishes a common monopoly. 

M. Say, in his valuable Treatise on Political Econo- 
my, in which he has explained with great clearness, 
many points not sufficiently developed by Adam 
Smith, has not treated the subject of rent in a manner 
entirely satisfactory. In speaking of the different 
natural agents which, as well as the land, co-operate 
with the labours of man, he observes : " Ueureuse- 
ment personne n'a pu dire, le vent et le soleil m'ap- 
partiennent, et le service qu'ils rendent doit m'etre 

* I cannot, however, agree with him in thinking that all land which yields food 
must necessarily y,eld rent. The land which is successively taken into cultivation in 
improving countries, may only pay profits and labour. A. fair profit on the stock em- 
ployed, including, of course, the payment of labour, will always be a sufficient in- 
ducement to cultivate. But, practically, the cases are very rare, where land is to be 
had by any body who cuooses to take it : and probably it is true, almost univer- 
sally that all appropriated land which yields food in its natural state, always yields 
a rent, whether cultivated or uncultivated. 



108 GF THE RENT OF LAND. [CH. III. 

paye."* And, though he acknowledges that, for ob- 
vious reasons, property inland is necessary, yet he 
evidently considers rent as almost exclusively owing 
to such appropriation, and to external demand. 

In the excellent work of M. de Sismondi, De la 
Richesse Commerciale, he says, in a note on the sub- 
ject of rent : " Cette partie de la rente fonciere est 
celle que les Economistes ont decoree du nom du 
produit net, comme etant le seul fruit du travail qui 
ajoutat quelque chose a la richesse nationale. On 
pourroit, au contraire, soutenir contre eux, que c'est la 
seule partie du produit du travail, dont la valeur soit 
purement nominale, et n'ait rien de reelle : c'est en 
effet le r6sultat de l'augmentation de prix qu'obtient 
un vendeur en vertu de son privilege, sans que la chose 
vendue en vaille reellement davantage."t 

The prevailing opinions among the more modern 
writers in our own country have appeared to me to 
incline towards a similar view of the subject; and, 
not to multiply citations, I shall only add, that in a 
very respectable edition of the Wealth of Nations, 
lately published by Mr. Buchanan, of Edinburgh, the 
idea of monopoly is pushed still farther. And, while 
former writers, though they considered rent as go- 
verned by the laws of monopoly, were still of opinion 
that this monopoly in the case of land was necessary 
and useful, Mr. Buchanan sometimes speaks of it even 
as prejudicial, and as depriving the consumer of what 
it gives to the landlord. 

In treating of productive and unproductive labour 
in the last volume, he observes, that,J " The neat sur- 
plus by which the Economists estimate the utility of 
agriculture, plainly arises from the high price of its 
produce, which, however advantageous to the landlord 
who receives it, is surely no advantage to the consu- 
mer who pays it. Were the produce of agriculture to 

♦ Vol I! r> 124 Of this work a new and much improved edition has lately 
been published, which is highly worthy the attention of all those who take an in- 
terest in these subjects. 

f Vol. I. p. 40. t Vo1 IV - P- V34 - 



SEC. I.] OF THE RENT OF LAND. 109 

be sold for a lower price, the same neat surplus would 
not remain, after defraying the expenses of cultivation ; 
but agriculture would be still equally productive to 
the general stock ; and the only difference would be, 
that, as the landlord was formerly enriched by the 
high price, at the expense of the community, the 
community will now profit by the low price, at the 
expense of the landlord. The high price in which 
the rent or neat surplus originates, while it enriches 
the landlord who has the produce of agriculture to 
sell, diminishes, in the same proportion, the wealth of 
those who are its purchasers ; and on this account it 
is quite inaccurate to consider the landlord's rent as a 
clear addition to the national wealth." 

In other parts of this work he uses the same, or 
even stronger language, and in a note on the subject 
of taxes, he speaks of the high price of the produce 
of land as advantageous to those who receive it, but 
proportionably injurious to those who pay it. " In 
this view," he adds, « it can form no general addition 
to the stock of the community, as the neat surplus in 
question is nothing more than a revenue transferred 
from one class to another, and, from the mere circum- 
stance of its thus changing hands, it is clear that no 
fund can arise out of which to pay taxes. The reve- 
nue which pays for the produce of land exists already 
m the hands of those who purchase that produce; 
and, if the price of subsistence were lower, it would 
still remain in their hands, where it would be just as 
available for taxation, as when by a higher price it is 
transferred to the landed proprietor;"* 

That there are some circumstances connected with 
rent, which have a strong affinity to a natural mono- 
poly, will be readily allowed. The extent of the 
earth itself is limited, and cannot be enlarged by hu- 
man demand. The inequality of soils occasions, 
even at an early period of society, a comparative 

*Vol. III. p. 212. 



110 OF THE RENT OF LAND. [CH. III. 

scarcity of the best lands ; and this scarcity is un- 
doubtedly one of the causes of rent properly so called. 
On this account, perhaps the term partial monopoly 
may be fairly applicable to it. But the scarcity oi 
land, thus implied, is by no means alone sufficient to 
produce the effects observed. And a more accurate 
investigation of the subject will shew us how diffe- 
rent the high price of raw produce is, both in its na- 
ture and origin, and the laws by which it is govern- 
ed, from the high price of a common monopoly. 

The causes of the excess of the price of raw pro- 
duce above the costs of production, may be stated to 

First, and mainly, That quality of the earth, by 
which it can be made to yield a greater portion of 
the necessaries of life than is required for the main- 
tenance of the persons employed on the land. 

2dly, That quality peculiar to the necessaries of 
life of being able, when properly distributed, to create 
their own demand, or to raise up a number of de- 
manded in proportion to the quantity of necessaries 

produced. . .- 

And, 3dly, The comparative scarcity ol fertile 

land, either natural or artificial. 

The quality of the soil here noticed as the primary 
cause of the high price of raw produce, is the gift of 
nature to man. It is quite unconnected with mono- 
poly, and yet is so absolutely essential to the exis- 
tence of rent, that without it no degree of scarcity or 
monopoly could have occasioned an excess of the 
price of raw produce above what was necessary for 
the payment of wages and profits. 

If, for instance, the soil of the earth had been such, 
that, however well directed might have been the in- 
dustry of man, he could not have produced from it 
more than was barely sufficient to maintain those 
whose labour and attention were necessary to its pro- 
ducts ; though, in this case, food and raw materials 
would have been evidently scarcer than at present, 






SEC. I.] OF THE RENT OF LAND. 1 1 1 

and the land might have been in the same manner 
monopolized by particular owners ; yet it is quite clear, 
that neither rent nor any essential surplus produce of 
the land in the form of high profits and high wages 
could have existed. 

On the other hand, it will be allowed, that in what- 
ever way the produce of a given portion of land may 
be actually divided, whether the whole is distributed 
to the labourers and capitalists, or a part is awarded 
to a landlord, the power of such land to yield rent is 
exactly proportioned to its fertility, or to the general 
surplus which it can be made to produce beyond 
what is strictly necessary to support the labour and 
keep up the capital employed upon it. If this sur- 
plus be as 1, 2, 3, 4, or 5, then its power of yielding 
a rent will be as 1, 2, 3, 4, or 5; and no degree of 
monopoly— no possible increase of external demand 
can essentially alter their different powers. 

But if no rent can exist without this surplus, and 
if the power of particular soils to pay rent be pro- 
portioned to this surplus, it follows that this surplus 
from the land, arising from its fertility, must evident- 
ly be considered as the foundation or main cause of 
all rent. 

Still however, this surplus, necessary and impor- 
tant as it is, would not be sure of possessing a value 
which would enable it to command a proportionate 
quantity of labour and other commodities, if it had 
not a power of raising up a population to consume it, 
and, by the articles produced in return, of creating an 
effective demand for it. 

It has been sometimes argued, that it is mistaking 
the principle of population to imagine, that the in- 
crease of food or of raw produce alone can occasion 
a proportionate increase of population. This is no 
doubt true ; but it must be allowed, as has been justlv 
observed by Adam Smith, that « when food is pro- 
vided, it is comparatively easy to find the necessary 
clothing and lodging." And it should always be re- 






112 OF THE RENT OF LAND. [CH. III. 

collected, that land does not produce one commodity 
alone, but in addition to that most indispensable of 
all commodities— food, it produces the materials for 
clothing, lodging, and firing.* 

It is therefore strictly true, that land produces the 
necessaries of life— produces the means by which, and 
by which alone, an increase of people may be brought 
into being and supported. In this respect it is funda- 
mentally different from every other kind of machine 
known to man ; and it is natural to suppose that the 
use of it should be attended with some peculiar 

effects. 

If an active and industrious family were possessed 
of a certain portion of land, which they could culti- 
vate so as to make it yield food, and the materials of 
clothing, lodging, and firing, not only for themselves 
but for five other families, it follows, from the princi- 
ple of population, that, if they properly distributed 
their surplus produce, they would soon be able to 
command the labour of five other families, and the 
value of their landed produce would soon be worth 
five times as much as the value of the labour which 
had been employed in raising it. But if, instead of a 
portion of land which would yield all the necessaries 
of life, they possessed only, in addition to the means 
of their own support, a machine which would pro- 
duce hats or coats for fifty people besides themselves, 
no efforts which they could make would enable them 
to ensure a demand for these hats or coats, and give 
them in return a command over a quantity of labour 
considerably greater than their fabrication had cost. 
For a long time, and by possibility for ever, the ma- 
chine might be of no more value than that which 

* It is however certain that, if either these materials he wanting, or the skill and 
capital necessary to work them up be prevented from forming, owmg to the insecu- 
rity of property or any other cause, the cultivators will soon slacken in their exer- 
tions, and the motives to accumulate and to increase their produce will greatly di- 
imnish. But in this case there will be a very slack demand for labour : and, whatever 
may be the nominal cheapness of provisions the labourer will not really be able to 
command such a portion of the necessaries of life, including, of course, ClOtffing, 
lodging, &c. as will occasion an increase of population. 



SEC. I.] OF THE RENT OF LAND. 113 

would result from its making hats or coats for the fa- 
mily. Its further powers might be absolutely thrown 
away from the want of demand ; and even when, 
from external causes totally independent of any efforts 
of their own, a population had risen to demand the 
fifty hats, the value of them in the command of 
labour and other commodities might permanently 
exceed but very little the value of the labour employ- 
ed in making them. 

After the new cotton machinery had been intro- 
duced into this country, a hundred yards of muslin 
of a certain quality would not probably command 
more labour than twenty-five yards would before; 
because the supply had increased faster than the de- 
mand, and there was no longer a demand for the 
whole quantity produced at the same price. But af- 
ter great improvements in agriculture have been 
adopted upon a limited tract of land, a quarter of 
wheat will in a short time command just as much la- 
bour as before ; because the increased produce, occa- 
sioned by the improvements in cultivation, is found to 
create a demand proportioned to the supply.which must 
still be limited ; and the value of corn is thus prevent- 
ed from falling like the value of muslins. 

Thus the fertility of the land gives the power of 
yielding a rent, by yielding a surplus quantity of ne- 
cessaries beyond the wants of the cultivators ; and 
the peculiar quality belonging to the necessaries of 
life, when properly distributed, tends strongly and 
constantly to give a value to this surplus bv raising 
up a population to demand it. 

These qualities of the soil and of its products have 
been, as might be expected, strongly insisted upon by 
the Economists in different parts of their works ; and 
they are evidently admitted as truths by Adam Smith, 
in those passages of the Wealth of Nations, in which 
he approaches the nearest to the doctrines of the 
Economists. But modern writers have in general 
been disposed to overlook them, and to consider rent 

15 









114 OF THE RENT OF LAND. [CH. IJI. 

as regulated upon the principles of a common mono- 
poly, although the distinction is of great importance, 
and appears obvious and striking in almost any in- 
stance that we can assume. 

If the fertility of the mines of the precious metals 
all over the world were diminished one half, it will 
be allowed that, as population and wealth do not ne- 
cessarily depend upon gold and silver, such an event 
might not only be consistent with an undimin- 
ished amount of population and wealth, but even 
with a considerable increase of both. In this case 
however it is quite certain that the rents, profits, 
and wages paid at the different mines in the world 
might not only not be diminished, but might be consi- 
derably increased. But if the fertility of all the 
lands in the world were to be diminished one half ;* 
inasmuch as population and wealth strictly depend 
upon the quantity of the necessaries of life which 
the soil affords, it is quite obvious that a great part 
of the population and wealth of the world would be 
destroyed, and with it a great part of the effective 
demand for necessaries. The largest portion of the 
lands in most countries would be thrown completely 
out of cultivation, and wages, profits, and rents, par- 
ticularly the latter, would be greatly diminished on 
all the rest. 1 believe there is hardly any land in this 
country employed in producing corn, which yields a 
rent equal in value to the wages of the labour and 
the profits of the stock necessary to its cultivation. 
If this be so, then, in the case supposed, the quantity 
of produce being only half of what was before ob- 

* Mr. Ricardo has supposed a case (p. 505.) of a diminution of fertility of one- 
tenth, and he thinks that it would increase rents by pushing capital upon less fer- 
tile land. I think, on the contrary, that in any well cultivated country it could 
not fail to lower rents, by occasioning the withdrawing of capital from the poorest 
soils. If the last land before in use would do hut little more than pay the necessary 
labour and a profit of 10 per cent, upon the capital employed, a diminution of a tenth 
part of the gro*s produce would certainly render many poor soils no longer worth 
cultivating. And, on Mr. Ricardo?s supposition, where, I would ask, is the increased 
dem.nd and increased price to come from, when from the greater quantity ot la- 
bour and capital necessary for the land, the means of obtaining the precious metals, 
or any other commodities, to exchange for corn, would be greatly reduced: 



EC. I.] OF THE RENT OF LAND. T15 

tained by the same labour and capital, it may be doubt- 
ed whether any land in England could be kept in til- 
lage. All effective demand for corn of home growth 
would be at an end ; and if a supply could not be ob- 
tained from abroad, the population of the country 
must be diminished to perhaps one-fifth of its former 
amount. 

The produce of certain vineyards in France, 
which, from the peculiarity of their soil and situation, 
exclusively yield wine of a certain flavour, is sold, of 
course, at a price very far exceeding the cost of pro- 
duction. And this is owing to the greatness of the 
competition for such wine, compared with the scanti- 
ness of its supply, which confines the use of it to so 
small a number of persons that they are able, and, 
rather than go without it, willing to give an exces- 
sively high price. But, if the fertility of these lands 
were increased so as very considerably to increase the 
produce, this produce might so fall in value as to di- 
minish most essentially the excess of its price above the 
cost of production. While, on the other hand, if the 
vineyards were to become less productive, this excess 
might increase to almost any extent.* 

The obvious cause of these effects is, that, in all 
common monopolies, the demand is exterior to, and 
independent of, the production itself. The number 
of persons, who might have a taste for scarce wines, 
and would be desirous of entering into a competition 
for the purchase of them, might increase almost in- 
definitely, while the produce itself was decreasing; 
and its price, therefore, would have no other limit 
than the numbers, powers, and caprices of the com- 
petitors for it. 

' Mr. Ricardo say?, (p. 505.) in answer to this passage, that, "given the high 
price, rent : must be high in proportion to abundance and not scarcity," whether in 
peculiar vineyards or on common corn lands. But this is beg°ing the whole of the 
question. The price cannot be given. By the force of external demand and di- 
minished supply the produce of an acre of Charapaigne grapes might permanently 
■command fifty time*, the labour that had been employed in cultivating it ; but no 
possible increase of external demand or diminution of supply could ever perma- 
nently enable the produce of an acre of corn to command more labour than it wouM 
support. 






116 OF THE RENT OF LAND. [CH. Ill 

In the production of the necessaries of life, on the 
contrary, the demand is dependent on the produce it- 
self, and the effects are therefore widely different. In 
this case it is physically impossible that the number 
of demanders should increase, while the quantity of 
produce diminishes, since the demanders can only ex- 
ist by means of the produce. 

In all common monopolies, an excess of the value 
of the produce above the value of the labour employ- 
ed in obtaining it, may be created by external de- 
mand. In the partial monopoly of the land which 
produces necessaries, such an excess can only be creat- 
ed by the qualities of the soil. 

In common monopolies, and all productions except 
necessaries, the laws of nature do very little towards 
proportioning their value in exchange to their value in 
use. The same quantity of grapes or cottons might, 
under different circumstances, be worth permanently 
three or three hundred days labour. In the production 
of necessaries alone, the laws of nature are constantly 
at work to regulate their exchangeable value according 
to their value in use ; and though from the great dif- 
ference of external circumstances, and particularly 
the greater plenty or scarcity of land, this is seldom 
or ever fully effected ; yet the exchangeable value of 
a given quantity of necessaries in commanding labour 
always tends to approximate towards the value of 
the quantity of labour which it can maintain, or in 
other words, to its value in use. 

In all common monopolies, the price of the pro- 
duce, and consequently the excess of price above the 
cost of production, may increase without any definite 
bounds. In the partial monopoly of the land which 
produces necessaries, the price of the produce cannot 
by any possibility exceed the value of the labour 
which it can maintain ; and the excess of its price 
above the cost of its production is subjected to a limit 
as impassable. This limit is the surplus of necessa- 
ries which the land can be made to yield beyond the 



sec. r. ] 0F THE RENT 0F LAN6 117 

lowest wants of the cultivators, and is strictl>tfepend- 
ent upon the natural or acquired fertility of the^oil 
Increase this fertility, the Lit will b exiled 3 

mit wif . may Jleld , 3 hi § h rent ' ditninisf 1 the 
limit Hi be contracted, and a high rent will become 
impossible; diminish it still further, thTLkJS 
SSSi^ the C ° St of Faction, and all rent will 

In short, in the one case, the power of the pro- 
duce to exceed in price the cost of the prod.Xn 
depends manily upon the degree of the Lnopo v 

thS> IS SU,elj 3 br ° ad and striki "S «is- 

Is it, then, possible to consider the price of th P 
necessaries of life as regulated upon the Spfe of a 
common monopoly ? Is it possible, with It 1- 
mondi, to regard rent as the sole produce of abour 

3 of that: 3 '"' PUreIy "T ina ^ nd « he «<"" "e 1 
suit of that augmentation of price which a seller cb- 

fEr* of a pecn.ia, privilege : or"! 

5K£^^eS°^ and pro « 

Is it not, on the contrary, a clear indiratinn nf o 
most inestimable quality i/' th e soil wS God 1" 
bestowed on man-the quality of being able to main 
tarn more persons than are necessary I ££kl? \ 
« not a part, and we shall see farther o„ that Vis an 
thell ely v rtT r \P art ' of that -"Pi- produce om 

of all I po'wt'anH beei ' Jmtly Stated t0 be thp ™™ 
ot ail power and enjoyment ; and without which, in 

«xi Y p et 508*: M edt' 00 dM8 n< " ■»«" l ° Mr - R ™*° 'o be well f „„ d ed ! c. 
-.tJ^S •sL%Z£ l J2\,*i£$ ' (P ' 5 s ?'--> *■* >»™ — ioeed „,„e 



fF THE RENT OF LAND. [CH. III. 

fact, tMre would be no cities, no military or naval 
foreef no arts, no learning, none of the finer manufac- 
tures, none of the conveniences and luxuries of foreign 
countries, and none of that cultivated I and l polished so- 
ciety, which not only elevates and dignifies individu- 
als, but which extends its beneficial influence through 
the' whole mass of the people ? 



SECTION II. 



On the necessary Separation of the Rent of Land from the 
Profits of the Cultivator and the Wages of the Labourer. 

In the early periods of society, or more remarkably 
perhaps, when the knowledge and capital of an old: 
society are employed upon fresh and fertile land, the 
surplus produce P of the soil shews itself chiefly in ex- 
traordinary high profits, and extraordinary high wages, 
and appears but little in the shape of rent While 
fertile land is in abundance, and may be had by who- 
ever asks for it, nobody of course will pay a rent to a 
landlord. But it is not consistent with the laws ot 
nature, and the limits and quality of the earth, that 
this state of things should continue. Diversities ot 
soil and situation must necessarily exist in all coun- 
tries. All land cannot be the most fertile : all situa- 
tions cannot be the nearest to navigable rivers and 
markets But the accumulation of capital beyond the 
means of employing it on land of the greatest natural 
fertility, and the most advantageously situated, must 
necessarily lower profits ; while the tendency ot po- 
pulation to increase beyond the means of subsistence 
must, after a certain time, lower the wages of labour. 
The expense of production will thus be diminished 
but the value of the produce that is the ^ntxtyoi 
labour, and of the other products of labour (besides 



SEC. U.] OF THE RENT OF LAND. 



119 



com) which it can command, instead of diminishing 
will be increased. There will be an increasing num- 
ber of people demanding subsistence, and ready to 
oner their services in any way in which they can be 
useful. 1 he exchangeable value of food will there- 
lore be m excess above the cost of production, on all 
the more fertile lands ; and this excess is that portion 
of the general surplus derived from land which has 
been peculiarly denominated rent. 

The quality of the earth first mentioned, or its 
power to yield a greater portion of the necessaries of 
lite than is required for the maintenance of the per- 
sons employed in cultivation, is obviously the founda- 
tion of this rent, and the limit to its possible increase. 
1 he second quality noticed, or the tendency of an 
abundance of food to increase population, is necessary 
both to give a value to the surplus of necessaries 
which the cultivators can obtain on the first land cul- 
tivated ; and also to create a demand for more food 
than can be procured from the richest lands. And the 
third cause, or the comparative scarcitv of fertile land 
which is clearly the natural consequence of the se- 
cond, is finally necessary to separate a portion of the 
general surpj Jssv from the land, into the specific form 
of rent to a IttWord.* 

Nor is it possible that rents should permanently re- 
main as parts of the profits of stock, or of the wages 
or labour. If profits and wages were not to fall, then 
without particular improvements in cultivation, none 
but the very richest lands could be brought into use. 

^^^^y^^^!^:^ s gg- > 5WS--M -V* that 
tility of the land, (p 507 ? ''-" XTZ f ! ,nc,eased or diminished fer . 

Hon the reader murtffi- but fia, L "^ T d ', W0U,d bear this i^erpreta- 
and havinz statpH thi» g ' °* aWare that the y col,,d be s ° construed • 

country' could yield but ™ ry mu e Jut *° 7 "^ *™ BtHl Verv ?°° r ' *»* 



120 OF THE RENT OF LAND. [CH. iff* 

The fall of profits and wages which practically takes 
place, undoubtedly transfers a portion of produce to 
the landlord, and forms a part, though, as we shall 
see farther on, only a part of his rent. But li this 
transfer can be considered as injurious to the consu- 
mers, then every increase of capital and population 
must be considered as injurious ; and a country which 
mip-ht maintain well ten millions of inhabitants ought 
to be kept down to a million. The transfer from pro- 
fits and wages, and such a price of produce as yields 
rent, which have been objected to as injurious, and as 
depriving the consumer of what it gives to the land- 
lord, are absolutely necessary in order to obtain any 
considerable addition to the wealth and revenue of the 
first settlers in a new country ; and are the natural 
and unavoidable consequences of that increase of cap- 
ital and population for which nature has provided m 
the propensities of the human race. 

When such an accumulation of capital takes place 
on the lands first chosen, as to render the returns of 
the additional stock employed less than could be ob- 
tained from inferior land,* it must evidently answer 
to cultivate such inferior land. But t ^cultivators of 
the richer land, after profits had faX^i, if they paid 
no rent, would cease to be mere farmers, or persons 
living upon the profits of agricultural stock ; they 
would evidently unite the characters of landlords and 
farmers— a union by no means uncommon, but which 
does not alter in any degree the nature of rent, or its 
essential separation from profits and wages. 

If the profits of stock on tb^fenor land taken 
into cultivation, were thirty p^ebt. and portions of 
the old land would yield forty per cent., ten per cent, 
of the forty would obviously be rent by whomsoever 
received. When capital had further accumulated, 

• The immediate motive for the cultivation of fresh land can only be ^ ? r ^ ec ; 
rise in the market-price of corn could not alone furnish such a motive. 



SEC. II.] OF THE RENT OF LAND. 121 

and labour fallen* on the more eligible lands of a 
country, other lands, less favourably circumstanced 
with respect to fertility or situation, might be occu- 
pied with advantage. The expenses of cultivation, 
including profits, having fallen, poorer land, or land 
more distant from rivers and markets, though yield- 
ing at first no rents, might fully repay these expenses, 
and fully answer to the cultivator. And again, when 
either the profits of stock, or the wages of labour, or 
both, have still further fallen, land still poorer or still 
less favourably situated, might be taken into cultiva- 
tion. And at every step it is clear, that if the price of 
produce do not fall, the rent of land must rise. And 
the price of produce will not fall so long as the indus- 
try and ingenuity of the labouring classes, assisted by 
the capitals of those not employed upon the land, can 
find something to give in exchange to the cultivators 
and landlords, which will stimulate them to continue 
undiminished their agricultural exertions, and main- 
tain their excess of produce. 

It may be laid down, therefore, as an incontrover- 
tible truth, that as a nation reaches any considerable 
degree of wealth, and any considerable fullness of 
population, the separation of rents, as a kind of fixture 
upon lands of a certain quality, is a law as invaria- 
ble as the action of the principle of gravity ; and 
that rents are neither a mere nominal value, nor a 
value unnecessarily and injuriously transferred from 
one set of people to another ; but a most real and es- 
sential part of the whole value of the national proper- 
ty, and placed by the laws of nature where they are, 
on the land, by whomsoever possessed, whether by 

* When a given porlion of labour and capital yields smaller returns, whether on 
new land or old, the loss is generally divided between the labourers and capitalists, 
and wages and profits fall at the same time. This is quite contrary to Mr. Ricardo's 
language. But the wages we refer to are totally different. He speaks of the cost 
of producing the necessaries of the labourer ; 1 speak of the necessaries themselves. 
In the same language Mr. Ricardo says, (p. 115.) that the rise of rent never falls 
upon the farmer. Yet does not the fall of profits go to rent? It is of very little 
consequence to the farmer and labourer, even on Mr Ricardo's theory, that they* 
continue to receive between them the same nominal sum of money, if that sum in ex- 
change for necessaries is not worth half what it was before. 

16 



122 OF THE RENT OF LAND. [CH. III. 

few or many, whether by the landlord, the crown, or 
the actual cultivator. 

This then is the mode in which rent would sepa- 
rate itself from profits and wages, in a natural state 
of things, the least interrupted by bad government, or 
any kind of unnecessary monopoly ; but in the differ- 
ent states in which mankind have lived, it is but too 
well known that bad government and unnecessary 
monopolies have been frequent ; and it is certain that 
they will essentially modify this natural progress, and 
often occasion a premature formation of rent. 

In most of the great eastern monarchies, the sove- 
reign has been considered in the light of the owner of 
the soil. This premature monopoly of the land join- 
ed with the two properties of the soil, and of its pro- 
ducts first noticed, has enabled the government to 
claim, at a very early period, a certain portion of the 
produce of all cultivated land ; and under whatever 
name this may be taken, it is essentially rent. It is 
an excess both of the quantity, and of the exchangea- 
ble value of what is produced above the actual costs 
of cultivation. 

But in most of these monarchies there was a great 
extent of fertile territory ; the natural surplus of the 
soil was very considerable ; and while the claims upon 
it were moderate, the remainder was sufficient to af- 
ford such ample profits and wages as could not be 
obtained in any other employment, and would allow 
of a rapid increase of population. 

It is obvious, however, that it is in the power of a 
sovereign who is owner of the soil in a very rich ter- 
ritory to obtain, at an early stage of improvement, an 
excessive rent. He might, almost from the first, de- 
mand all that was not necessary to allow of a mo- 
derate increase of the cultivators, which, if their skill 
was not deficient, would afford him a larger propor- 
tion of the whole produce in the shape of a tax or 
rent, than could probably be obtained at any more 
advanced period of society ; but then of course only 



SEC. II.] OF THE RENT OF LAND. 123 

the most fertile lands of the country could be cultivat- 
ed ; and profits, wages and population would come 
to a premature stop. 

It is not to be expected that sovereigns should push 
their rights over the soil to such an extreme extent, 
as it would be equally contrary to their own interest, 
and to that of their subjects ; but there is reason to 
believe that in parts of India, and many other eastern 
countries, and probably even in China, the progress 
of taxation on the land, founded upon the sovereign's 
right to the soil, together with other customary pay- 
ments out of the raw produce, have forcibly and pre- 
maturely lowered the profits of stock, and the wages 
of labour on the land, and have thrown great obsta- 
cles in the way of progressive cultivation and popu- 
lation in latter times, while much good land has re- 
mained waste. This will always be the case, when, 
owing to an unnecessary monopoly, a greater portion 
of the surplus produce is taken in the shape of rent 
or taxes, than would be separated by the natural fall 
of profits and wages. But whatever may be the na- 
ture of the monopoly of land, whether necessary or 
artificial, it will be observed that the power of paying 
a rent or taxes on the land, is completely limited by 
its fertility ; and those who are disposed to underrate 
the importance of the two first causes of rent which 
I have stated, should look at the various distributions 
of the produce in kind which take place in many 
parts of India, where, when once the monopoly has 
enabled the sovereign to claim the principal part of the 
rent of the soil, every thing else obviously depends 
upon the surplus of necessaries which the land yields, 
and the power of these necessaries to command la- 
bour. 

It may be thought, perhaps, that rent could not be 
forcibly and prematurely separated from profits and 
wages so as unnaturally to reduce the latter, because 
capital and labour would quit the land if more could 
be made of them elsewhere ; but ft should be recol- 



124 OF THE RENT OF LAND. [CH. III. 

lected, that the actual cultivators of the soil in these 
countries are generally in a very low and degraded 
condition; that very little capital i& employed by 
them, and scarcely any which they can remove and 
employ in another business ; that the surplus produce 
possessed by the government soon raises up a popula- 
tion to be employed by it, so as to keep down the 
price of labour in other departments to the level of 
the price in agriculture ; and that the small demand 
for the products of manufacturing and commercial 
industry, owing to the poverty of the great mass of 
society, affords no room for the employment of a 
large capital, with high profits, in manufactures and 
commerce. On account of these causes which tend 
to lower profits, and the difficulty of collecting mo- 
ney, and the risk of lending it which tend to raise 
interest, I have long been of opinion, that though the 
rate of interest in different countries is almost the 
only criterion from which a judgment can be formed of 
the rate of profits; yet that in such countries as In- 
dia and China, and indeed in most of the Eastern and 
southern regions of the globe, it is a criterion subject 
to the greatest uncertainty. In China, the legal inte- 
rest of money is three per cent, per month.* But it 
is impossible to suppose, when we consider the state 
of China, so far as it is known to us, that capital em- 
ployed on land can yield profits to this amount ; or, 
indeed, that capital can be employed in any steady 
and well-known trade with such a return. 

In the same way extraordinary accounts have been 
given of the high rate of interest in India ; but the 
state of the actual cultivators completely contradicts 
the supposition, that, independently of their labour, 
the profits upon their stock is so considerable ; and 
the late reduction of the government paper to six per 
cent, fully proves that, in common and peaceable 

* Penal code, Staunton, p. 158. The market rate of interest at Canton is said, 
however, to be only from twelve to eighteen per cent. Jd. note XVII. 



SEC. II.] OF THE RENT OF LAND. 125 

times, the returns of capital, which can be depended 
upon in other sorts of business, are by no means so 
great as to warrant the borrowing at a very high rate 
of interest. 

It is probable that, with the exception of occasion- 
al speculations, the money that is borrowed at the 
high rates of interest noticed in China and India, is 
be Trowed in % both countries, rather with a view to ex- 
penditure omhe payment of debts, than with a view 
to profit. 

Some of the causes, which have been noticed as 
tending prematurely and irregularly to raise rents and 
lower profits in the countries of the east, operated 
without doubt to a certain extent in the early stages 
of society in Europe. At one period most of the 
land was cultivated by slaves, and in the metayer sys- 
tems which succeeded, the division of the crop was 
so arranged as to allow the cultivator but little more 
than a scanty subsistence. In this state of things the 
rate of profits on the land could have but little to do 
with the general rate of profits. The peasant could 
not, without the greatest difficulty, realize money and 
change his profession ; and it is quite certain that no 
one who had accumulated a capital in manufactures 
and commerce, would employ it in cultivating the 
lands of others as a metayer. There would thus be 
little or no interchange of capital between trade and 
agriculture, and their profits might in consequence be 
very unequal. 

It is probable however, as in the case of China 
and India above mentioned, that profits would not be 
excessively high. This would depend indeed mainly 
upon the supply of capital in manufactures and com- 
merce ; if capital were scarce, compared with the 
demand for the products of these kinds of industry, 
profits would certainly be high ; and all that can be 
said safely is, that we cannot infer that they were 
very high, from the very high rates of interest occa- 
sionally mentioned. 



126 OF THE RENT OF LAND. [cH. Ill, 

Rent then has been traced to the same common 
nature with that general surplus from the land, which 
is the result of certain qualities of the soil and its pro- 
duce ; and it has been found to commence its separa- 
tion from profits and wages, as soon as they begin to 
fall from the scarcity of fertile land, whether occasion- 
ed by the natural progress of a country towards 
wealth and population, or by any premature and un- 
necessary monopoly of the soil. • 



SECTION III. 



Of the Causes which tend to raise Rents in the ordinary Pro- 
gress of Society. 

In tracing more particularly the laws which govern 
the rise and fall of rents, the main causes which di- 
minish the expenses of cultivation, or reduce the costs 
of the instruments of production, compared with the 
price of produce, require to be more specifically enu- 
merated. The principal of these seem to be four :— 
1st, Such an accumulation of capital as will lower 
the profits of stock ; 2dly, such an increase of popula- 
tion as will lower the wages of labour ; 3dly, such 
agricultural improvements, or such increase of exer- 
tions, as will diminish the number of labourers neces- 
sary to produce a given effect ; and 4thly, such an in- 
crease in the price of agricultural produce, from in- 
creased demand, as, without nominally lowering the 
expense of production, will increase the difference be- 
tween this expense and the price of produce. 

If capital increases so as to become redundant in 
those departments where it has been usually employ- 
ed with a certain rate of profits, it will not remain 
idle, but will seek employment either in the same or 
other departments of industry, although with inferior 



SEC. HI.] OF THE RENT OF LAND. 127 

returns, and this will tend to push it upon less fertile 
soils. 

In the same manner, if population increases faster 
than the demand for it, the labourers must content 
themselves with a smaller quantity of necessaries ; and, 
the expense of labour in kind being thus diminished, 
land may be cultivated which could not have been 
cultivated before. 

The two first causes, however, here mentioned, 
sometimes act so as to counterbalance one another. 
An increase of capital raises the wages of labour, and 
a fall of wages raises the profits of stock ; but these 
are only temporary effects. In the natural and regu- 
lar progress of a country towards the accumulation of 
stock and the increase of population, the rate of pro- 
fits and the real wages of labour permanently fall to- 
gether. This may be effected by a permanent rise 
in the money price of corn, accompanied by a rise, 
but not a proportionate rise, in the money wages of 
labour. The rise in the money price of corn is coun- 
terbalanced to the cultivator by the diminished quan- 
tity of produce obtained by the same capital ; and his 
profits, as well as those of all other capitalists, are di- 
minished, by having to pay out of the same money 
returns higher money wages ; while the command of 
the labourer over the necessaries of life is of course 
contracted by the inadequate rise of the price of la- 
bour compared with the price of corn. 

But this exact and regular rise in the money price 
of corn and labour is not necessary to the fall of pro- 
fits ; indeed it will only take place in the regular way 
here described, when money, under all the changes 
to which a country is subjected, remains of the same 
value, according to the supposition of Mr. Ricardo,* 
a case which may be said never to happen. Profits 
may undoubtedly fall, and rent be separated, under 
anv variations of the value of money. All that is 

* Prioc. of Polit. Econ. ch. i. p. 24. 2d ed. 



128 OF THE RENT OF LAND. [CH. Ill, 

necessary to the most regular and permanent fall of 
profits (and in this Mr. Ricardo would agree with 
me) is, that an increased proportion of the value of the 
whole produce obtained by a given quantity of capi- 
tal, should be absorbed by labour. On the land, this 
is effected by a diminution of the produce, obtained 
by the same capital without a proportionate diminu- 
tion of the part absorbed by labour, which leaves less 
for profits, at the same time that the real wages of 
the labourer are diminished. But it is obvious that if 
a smaller quantity of the necessaries of life derived 
from a given capital employed on the land, be suffi- 
cient to supply both the capitalists and the labourer,* 
the expenses of cultivation will be diminished, poorer 
land may be cultivated under the new rates of wages 
and profits, and rent will rise on that which was be- 
fore in cultivation. 

The third cause enumerated as tending to raise 
rents by lowering the expenses of cultivation compared 
with the price of the produce is, such agricultural 
improvements or such increase of exertions, as will 
diminish the number of labourers necessary to pro- 
duce a given effect. 

In improving and industrious countries, not defi- 
cient in stimulants, this is a cause of great efficacy. If 
the improvements introduced were of such a nature 
as considerably to diminish the costs of production, 
without increasing in any degree the quantity of pro- 
duce, then, as it is quite certain that no alteration 
would take place in the price of corn, the extrava- 
gant profits of the farmers would soon be reduced by 
the competition of capitals from manufactures and 

* Mr. Ricardo has observed (p. /)lfi.) in reference to the second cause which 1 
have here stated, as tending to raise rer.ts, " that no fill of wages can raise rents ; 
for it will neither diminish the portion, nor the value of the portion of the produce 
which will he allotted to the farmer and labourer together." But where, I would 
ask, will the high real wages of Vmerica finally go? to profits?' or to rent ? If la- 
bourers were permanently to receive the value of a bushel of wheat a day, none but 
the richest lands could pay the expense of working tliem. An increase of population 
and a fall of such wages would be absolutely necessary to the cultivation of poor 
land How then can it be said that a fall or wages is not one of the causes of a rue 
of rents ?■ 



5EC. III.] OF THE RENT OF LAND. 129 

commerce ; and as the whole arena for the employ- 
ment of capital would rather have been diminished 
than increased, profits on land as well as elsewhere 
would soon be at their former level, and the increased 
surplus from the diminished expenses of cultivation 
would go to increase the rents of the landlords. 

But if these improvements, as must always be the 
case, would facilitate the cultivation of new land, and 
the better cultivation of the old with the same capital, 
more corn would certainly be brought to market. 
This would lower its price ; but the fall would be of 
short duration. The operation of that important 
cause noticed iu the early part of this chapter, which 
distinguishes the surplus produce of the land from all 
others, namely, the power of the necessaries of life, 
when properly distributed, to create their own de- 
mand, or in other words the tendency of population 
to press against the means of subsistence, would soon 
raise the prices of corn and labour, and reduce the 
profits of stock to their former level, while in the 
mean time every step in the cultivation of poorer lands 
facilitated by these improvements, and their applica- 
tion to all the lands of a better quality before culti- 
vated, would universally have raised rents : and thus, 
under an improving system of cultivation, rents mi^ht 
continue rising without any rise in the exchangeable 
value of corn, or any fall in the real wages of labour, 
or the general rate of profits. 

The very great improvements in agriculture which 
have taken place in this country are clearly demon- 
strated by the profits of stock being as high now as 
they were nearly a hundred years ago, when the 
land supported but little more than half of its present 
population. And the power of the necessaries of life, 
when properly distributed, to create their own de- 
mand, is fully proved by the palpable fact, that the 
exchangeable value of corn in the command of labour 
and other commodities is, to say the least, undimin- 
ished, notwithstanding the many and great improve- 



130 OF THE RENT OF LAND. [CH. III. 

ments which have been successively introduced in 
cultivation, both by the introduction of better imple- 
ments, and by an improved system of managing the 
land. In fact, these improvements have gone wholly 
to the increase of rents and the payment of taxes. 

It may be added that, when improvements are in- 
troduced in particular districts, which tend to dimin- 
ish the costs of production, the advantages derived 
from them go immediately, upon the renewal of 
leases, to landlords, as the profits of stock must ne- 
cessarily be regulated by competition, according to 
the general average of the whole country. Thus the 
very great agricultural improvements which have 
taken place in some parts of Scotland, the north of 
England, and Norfolk, have raised, in a very extraor- 
dinary manner, the rents of those districts, and left 
profits where they were. 

It must be allowed then, that facility of production 
in necessaries,* unlike facility of production in all 
other commodities, is never attended with a perma- 
nent fall of price. They are the only commodities 
of which it can be said that their permanent value in 
the command of labour is nearly proportioned to their 
quantity. And consequently, in the actual state of 
things, all savings in the cost of producing them 
will permanently increase the surplus which goes to 
rent. 

The fourth cause which tends to raise rents, is 
such an increase in the price of agricultural produce 
from whatever source arising, as will increase the dif- 
ference between the price of produce, and the costs 
of production. 

We have already adverted to a rise in the price of 
raw produce, which may take place in consequence 

* Properly speaking, facility of production in necessaries can only be temporary, 
where tliere are gradations of bnd as far as barrenness, except w hen capital is pre- 
ve .ted from increasing by the want of will to save It may then be permanent 
But though corn will, in that case, cost but little labour, its exchangeable value will 
be high, that is, it will command a great deal. 



SEC. III.] OF THE RENT OF LAND. 131 

of a regular increase of capital and population while 
money remains nearly of the same value. But this 
sort of rise is confined within narrow limits, and has lit- 
tle share in those great variations in the price of corn, 
which are most frequently the subject of observation. 
The kind of increased price, the effects of which I 
wish now more particularly to consider, is a rise of 
price from increased demand, terminating in an alte- 
ration in the value of the precious metals. 

If a great and continued demand should arise 
among surrounding nations for the raw produce of a 
particular country, the price of this produce would of 
course rise considerably ; and the expenses of cultiva- 
tion rising only slowly and gradually to the same pro- 
portion, the price of produce might for a long time 
keep so much a head as to give a prodigious stimulus 
to improvement, and encourage the employment of 
much capital in bringing fresh land under cultivation, 
and rendering the old much more productive. If 
however the demand continued, the price of labour 
would ultimately rise to its former level, compared 
with corn ; a decided fall in the value of money sup- 
ported by the abundant exportation of raw produce 
might generally take place ; labour would become ex- 
tremely productive in the purchase of all foreign com- 
modities ; and rents might rise without a fall of profits 
or wages. 

The state of money prices, and the rapid progress 
of cultivation in North America, tend strongly to il- 
lustrate the case here supposed. The price of wheat 
m the eastern states is nearly as high as in France 
and Flanders ; and owing to the continued demand 
for hands, the money price of day-labour is nearly 
double what it is in England. But this high price 
of corn and labour has given great facilities to the 
farmers and labourers in the purchase of clothing and 
all sorts of foreign necessaries and conveniences. 
And it is certain that if the money prices of corn and 
labour had been both lower, yet had maintained the 



132 <*F THE RENT OF LAND. [cH. Ill 

same proportion to each other, land of the same quafe 
ty could not have been cultivated, nor could equal 
rents have been obtained with the same rate of pro- 
fits and the same real wages of labour. 

Effects of a similar kind took place in our own 
country from a similar demand for corn during the 
twenty years from 1793 to the end of 1813, though 
the demand was not occasioned in the same way. 
For some time before the war, which commenced in 
1793, we had been in the habit of importing a cer- 
tain quantity of foreign grain to supply onr habitual 
consumption. The war naturally increased the ex- 
pense of this supply by increasing the expense of 
freight, insurance, &c. ; and, joined to some bad sea- 
sons and the subsequent decrees of the French go- 
vernment, raised the price, at which wheat could be 
imported, in tne quantity wanted to supply the de- 
mand, in a very extraordinary manner. 

This great rise in the price of imported corn, al- 
though the import bore but a small proportion to what 
was grown at home, necessarily raised in the same 
proportion the whole mass, and gave the same sort 
of stimulus to domestic agriculture as would have 
taken place from a great demand for our corn in 
foreign countries. In the mean time, the scarcity 
of hands, occasioned by an extending war, an in- 
creasing commerce, and the necessity of raising more 
food, joined to the ever ready invention of an in- 
genious people when strongly stimulated, introduced 
so much saving of manual labour into every depart- 
ment of industry, that the new and inferior land 
taken into cultivation to supply the pressing wants 
of the society, was worked at a less expense of la- 
bour than richer soils some years before. Yet still 
the price of grain necessarily kept up as long as the 
most trifling quantity of foreign grain, which could 
onlj be obtained at a very high price, was wanted 
in order to supply the existing demand. With this 
high price, which at one time rose to nearly treble in 



SEC. III.] OF THE RENT OF LAND. 135 

paper and above double in bullion, compared with the 
prices before the war, it was quite impossible that 
labour should not rise nearly in proportion, and with 
it. of course, as profits had not fallen, all the commo- 
dities into which labour had entered. 

We had thus a general rise in the prices of com- 
modities, or fall in the value of the precious metals, 
compared with other countries, which our increas- 
ing foreign commerce and abundance of exportable 
commodities enabled us to sustain. That the last 
land taken into cultivation in 1813 did not require 
more labour to work it than the last land improved 
m the year 1790, is incontrovertible proved by the 
acknowledged fact, that the rate of interest and pro- 
fits was higher in the later period than the earlier. 
But still the profits were not so much higher as not 
to have rendered the interval most extremely favour- 
able to the rise of rents. This rise, during the in- 
terval in question, was the theme of universal re- 
mark ; and though a severe and calamitous check, 
from a combination of unfortunate circumstances, 
has since occurred ; yet the great drainings and per- 
manent improvements, which were the effects of so 
powerful an encouragement to agriculture, have 
acted like the creation of fresh land, and have in- 
creased the real wealth and population of the coun- 
try, without increasing the labour and difficulty of 
raising a given quantity of grain. 

It is obvious then that a fall in the value of the 
precious metals, commencing with a rise in the price 
of corn, has a strong tendency, while it lasts, to en- 
courage the cultivation of fresh land and the forma- 
tion of increased rents. 

A similar effect would be produced in a country 
which continued to feed its own people, by a great 
and increasing demand for its manufactures. These 
manufactures, if from such a demand the value of 
their amount in foreign countries was greatly to in- 
crease, would bring back a great increase of value 



J34 OF THE RENT OF LAND. [CH. Ill* 

in return, -which increase of value could not fail to 
increase the value of the raw produce. The demand 
for agricultural as well as manufactured produce 
would be augmented ; and a considerable stimulus, 
though not perhaps to the same extent as in the last 
case, would be given to every kind of improvement 

on the land. 

Nor would the result be very different from the in- 
troduction of new machinery, and a more judicious 
division of labour in manufactures. It almost al- 
ways happens in this case, not only that the quanti- 
ty of manufactures is very greatly increased, but 
that the value of the whole mass is augmented, from 
the great extension of the demand for them both 
abroad and at home, occasioned by their cheapness. 
We see, in consequence, that in all rich manufactur- 
ing and commercial countries, the value of manu- 
factured and commercial products bears a very high 
proportion to the raw products ;* whereas, in com- 
paratively poor countries, without much internal trade 
and foreign commerce, the value of their raw pro- 
duce constitutes almost the whole of their wealth. 

In those cases where the stimulus to agriculture 
originates in a prosperous state of commerce and 
manufactures, it sometimes happens that the first step 
towards a rise of prices is an advance in the wages 
of commercial and manufacturing labour. 1 his will 
naturally have an immediate effect upon the price ot 
corn, and advance of agricultural labour will follow. 
It is not, however, necessary, even in those cases, 
that labour should rise first. If, for instance, the 
population were increasing as fast as the mercantile 
and manufacturing capital, the only effect might be 
an increasing number of workmen employed at the 
same wages, which would occasion a rise in the price 

Empire, p. 96. 



SEC. III.] OF THE RENT OF LAND. 135 

of corn before any rise had taken place in the wages 
of labour. 

We are supposing, however, now, that labour does 
ultimately rise nearly to its former level compared 
with corn, that both are considerably higher, and 
that money has suffered a decided change of va- 
lue. Yet in the progress of this change, the other 
outgoings, besides labour, in which capital is expend- 
ed, can never all rise at the same time, or even final- 
ly in the same proportion. A period of some con- 
tinuance can scarcely fail to occur when the differ- 
ence between the price of produce and the cost of 
production is so increased as to give a great stimulus 
to agriculture ; and as the increased capital, which is 
employed in consequence of the opportunity of mak- 
ing great temporary profits, can seldom or ever be en- 
tirely removed from the land, a part of the advan- 
tage so derived is permanent; together with the 
whole of that which is occasioned by a greater rise 
in the price of corn than in some of the materials of 
the farmer's capital. 

Mr. Ricardo acknowledges that, in a fall of the 
value of money, taxed commodities will not rise in 
the same proportion with others ; and, on the sup- 
position of the fall in the value of money being pe- 
culiar to a particular country, the same must unques- 
tionably be said of all the various commodities which 
are either wholly or in part imported from abroad, 
many of which enter into the capital of the farmer. 
He would, therefore, derive an increased power from 
the increased money price of corn compared with 
those articles. A fall in the value of money cannot 
indeed be peculiar to one country without the pos- 
session of peculiar advantages in exportation ; but 
with these advantages, which we know are very fre- 
quently possessed, and are very frequently increased 
by stimulants, a fall in the value of money can 
scarcely fail permanently to increase the power of 
cultivating poorer lands, and of advancing rents. 



136 OF THE RENT OF LAND. [CH. III. 

Whenever then, by the operation of the four causes 
above mentioned, the difference between the price of 
produce and the cost of the instruments of production 
increases, the rents of land will rise. 

It is, however, not necessary that all these four 
causes should operate at the same time ; it is only 
necessary that the difference here mentioned should 
increase. If, for instance, the price of produce were 
to rise, while the wages of labour and the price of the 
other branches of capital did not rise in proportion, 
and at the same time improved modes of agriculture 
were coming into general use, it is evident that this 
difference might be increased, although the profits of 
agricultural stock were not only undiminished, but 
were to rise decidedly higher. 

Of the great additional quantity of capital employ- 
ed upon the land in this country during the last twen- 
ty years, by far the greater part is supposed to have 
been generated on the soil, and not to have been 
brought from commerce or manufactures. And it was 
unquestionably the high profits of agricultural stock, 
occasioned by improvements in the modes of agricul- 
ture, and by the constant rise of prices, followed only 
slowly by a proportionate rise in the materials of the 
farmer's capital, that afforded the means of so rapid 
and so advantageous an accumulation. 

In this case cultivation has been extended, and rents 
have risen, although one of the instruments of pro- 
duction, capital, has been dearer. 

In the same manner a fall of profits, and improve- 
ments in agriculture, or even one of them separately, 
might raise rents, notwithstanding a rise of wages. 

It is further evident, that no fresh land can be taken 
into cultivation till rents have risen, or would allow 
of a rise upon what is already cultivated. 

Land of an inferior quality requires a great quan- 
tity of capital to make it yield a given produce : and 
if the actual price of this produce )e not such as fully 
to compensate the cost of production, including pro- 



SEC. III.] OF THE RENT OF LAND. 137 

fits, the land must remain uncultivated. It matters 
not whether this compensation is effected by an increase 
in the money price of raw produce, without a propor- 
tionate increase in the money price of the instruments 
of production ; or by a decrease in the price of the in- 
struments of production, without a proportionate de- 
crease in the price of produce. What is absolutely 
necessary is, a greater relative cheapness of the instru- 
ments of production, to make up for the quantity of 
them required to obtain a given produce from poor 
land. 

But whenever, by the operation of one or more of 
the causes before mentioned, the instruments of pro- 
duction become cheaper, and the difference between 
the price of produce and the expenses of cultivation 
increases, rents naturally rise. It follows therefore as 
a direct and necessary consequence, that it can never 
answer to take fresh land of a poorer quality into cul- 
tivation till rents have risen, or would allow of a rise, 
on what is already cultivated. 

It is equally true, that without the same tendency 
to a rise of rents,* it cannot answer to lay out fresh 
capital in the improvement of old land ; at least upon 
the supposition, that each farm is already furnished 
with as much capital as can be laid out to advantage, 
according to the actual rate of profits. 

It is only necessary to state this proposition to make 
its truth appear. It certainly may happen, (and I fear 
it happens very frequently) that farmers are not pro- 
vided with all the capital which could be employed 
upon their farms at the actual rate of agricultural pro- 
fits. But supposing they are so provided, it implies 
distinctly, that more could not be applied without loss, 
till, by the operation t)f one or more of the causes 
above enumerated, rents had tended to rise. 

* Rents may be said to have a tendency to rise, when more capital is ready to be 
laid out upon the old land, but cannot be laid out without diminished returns. When 
profits fall in manufactures and commerce from the diminished price of goods, capi- 
talists will be ready to give higher rents for the old farms. 

18 



138 OF THE RENT OF LAND. [CH. 111. 

It appears then, that the power of extending cul- 
tivation and increasing produce, both by the cultiva- 
tion of fresh land and the improvement of the old, de- 
pends entirely upon the existence of such prices, com- 
pared with the expense of production, as would raise 
rents in the actual state of cultivation. 

But though cultivation cannot be extended and 
the produce of a country increased, except in such a 
state of things as would allow of a rise of rents ; yet 
it is of importance to remark, that this rise of rents 
will be by no means in proportion to the extension of 
cultivation or the increase of produce. Every rela- 
tive fall in the price of the instruments of production 
may allow of the employment of a considerable quan- 
tity of additional capital ; and when either new land 
is taken into cultivation or the old improved, the in- 
crease of produce may be considerable, though the 
increase of rents be trifling. We see, in consequence, 
that in the progress of a country towards a high state 
of cultivation, the quantity of capital employed upon 
the land and the quantity of produce yielded by it, 
bear a constantly increasing proportion to the amount 
of rents, unless counterbalanced by extraordinary im- 
provements in the modes of cultivation.* 

According to the returns lately made to the Board 
of Agriculture, the average proportion which rent 
bears to the value of the whole produce seems not to 
exceed one-fifth ;t whereas formerly, when there was 
less capital employed and less value produced, the 
proportion amounted to one-fourth, one third, or even 
two-fifths. Still, however, the numerical difference 

• To the honour of Scotch cultivators it should be observed, that they have ap- 
plied their capitals so very skilfully and economically, that at the same time that 
they have prodigiously increased the produce, they have increased the landlord's 
proportion of it. The difference between the landlord's share of the produce in 
Scotland and in England is quite extraordinary— much greater than can be accounted 
for, either by the natural soil or the absence of tithes and poors-rates.— See Sir John 
Sinclair's valuable Account of the Husbandry of Scotland ; and the General Report 
not long since published — works replete with the most useful and interesting infor- 
mation on agricultural subjects. 

f See Evidence before the House of Lords, given by Arthur Young, p. 66. 



SEC. III.] OF THE RENT OF LAND. 



139 



between the price of produce and the expenses of 
cultivation increases with the progress of improve- 
ment ; and though the landlord has a less share of the 
whole produce, yet this less share, from the very 
great increase of the produce, yields a larger quanti- 
ty, and gives him a greater command of corn and la- 
bour. If the produce of land be represented by the 
number six, and the landlord has one-fourth of it, his 
share will be represented by one and a half. If the 
produce of land be as ten, and the landlord has one- 
fifth of it, his share will be represented by two. In 
the latter case, therefore, though the proportion of 
the landlord's share to the whole produce is greatly 
diminished, his real >ent, independently of nominal 
price, will be increased in the proportion of from 
three to four. And, in general, in all cases of in- 
creasing produce, if the landlord's share of this pro- 
duce do not diminish in the same proportion, which, 
though it often happens during the currency of leases, 
rarely or never happens on the renewal of them, the 
real rents of land must rise. 

We see then that a progressive rise of rents seems 
to be necessarily connected with the progressive cul- 
tivation of new land, and the progressive improve- 
ment of the old : and that this rise is the natural and 
necessary consequence of the operation of four cau- 
ses, which are the most certain indications of increas- 
ing prosperity and wealth — namely, the accumulation 
of capital, the increase of population, improvements 
in agriculture, and the high market price of raw pro- 
duce, occasioned either by a great demand for it in 
foreign countries, or by the extension of commerce 
and manufactures. 



140 OF THE RENT OF LAND. [CH. HI. 

SECTION IV. 

Of the Causes which tend to lower Rents, 

The causes which lead to a fall of rents are, as may 
be expected, exactly of an opposite description to 
those which lead to a rise :. namely, diminished capi- 
tal, diminished population, a bad system of cultiva- 
tion, and the low market price of raw produce. 
They are all indications of poverty and decline, and 
are necessarily connected with the throwing of infe- 
rior land out of cultivation, and the continued deteri- 
oration of the land of a superior quality.* 

The necessary effects of a diminished capital and 
diminished population in lowering rents, are too ob- 
vious to require explanation ; nor is it less clear that 
an operose and bad system of cultivation might pre- 
vent the formation of rents, even on fertile land, by 
checking the progress of population and demand 
beyond what could be supplied from the very richest 
qualities of soil. I will only therefore advert to the 
fourth cause here noticed. 

We have seen that a rise in the price of corn, ter- 
minating in an alteration in the value of the precious 
metals, would give a considerable stimulus to cultiva- 
tion for a certain time, and some facilities permanently, 
and might occasion a considerable and permanent rise 
of rents. And this case was exemplified by what 
had happened in this country during the period from 
1794 to 1814. 

It may be stated in like manner, that a fall in the 
price of corn terminating in a rise in the value of 
money, must, upon the same principles, tend to throw 
land out of cultivation and lower rents. And this 
may be exemplified by what happened in this coun- 
try at the conclusion of the war. The fall in the 

* The effects of importing foreign corn will be considered more particularly in the 
next section, and a subsequent part of this chapter. 



SEC. IV.] OF THE BENT OF LAND. 141 

price of corn at that period necessarily disabled the 
cultivators from employing the same quantity of la- 
bour at the same price. Many labourers, therefore, 
were unavoidably thrown out of employment ; and, 
as the land could not be cultivated in the same way, 
without the same number of hands, the worst soils 
were no longer worked, much agricultural capital 
was destroyed, and rents universally fell ; while this 
great failure in the power of purchasing, among all 
those who either rented or possessed land, naturally 
occasioned a general stagnation in all other trades. 
In the mean time, the fall in the price of labour from 
the competition of the labourers joined to the poverty 
of the cultivators, and the fall of rents both from the 
want of power and the want of will to pay the for- 
mer rents, restored by degrees the prices of commo- 
dities, the wages of labour, and the rents of land, 
nearly to their former proportions, though all lower 
than they were before. The land which had been 
thrown out of tillage might then again be cultivated 
with advantage ; but in the progress from the lower to 
the higher value of money, a period would have 
elapsed of diminished produce, diminished capital, and 
diminished rents. The country would recommence 
a progressive movement from an impoverished state ; 
and, owing to a fall in the value of corn greater than in 
taxed commodities, foreign commodities, and others 
which form a part of the capital of the farmer and of 
the necessaries and conveniences of the labourer the 
permanent difficulties of cultivation would be great 
compared with the natural fertility of the worst soil 
then actually in tillage. 

It appeared that, in the progress of cultivation and 
ot increasing rents, it was not necessary that all the 
instruments of production should fall in price at the 
same time ; and that the difference between the price 
of produce and the expense of cultivation might in- 
crease, although either the profits of stock or the wa- 
ges of labour might be higher, instead of lower. 



142 OF THE RENT OF LAND. [CH. Hi. 

In the same manner, when the produce of a coun- 
try is declining, and rents are falling, it is not neces- 
sary that all the instruments of production should be 
dearer. In the natural progress of decline, the profits 
of stock are necessarily low ; because it is specifically 
the want of adequate returns which occasions this de- 
cline. After stock has been destroyed, profits may 
become high and wages low ; but the low price of 
raw produce joined to the high profits of a scanty 
capital, may more than counterbalance the low wages 
of labour, and render it impossible to cultivate land 
where much capital is required. 

It has appeared also, that in the progress of culti- 
vation, and of increasing rents, rent, though greater 
in positive amount, bears a less and less proportion to 
the quantity of capital employed upon the land, and 
the quantity of produce derived from it. According 
to the same principle, when produce diminishes and 
rents fall, though the amount of rent will always be 
less, the proportion which it bears to capital and pro- 
duce will be greater. And as, in the former case, the 
diminished proportion of rent was owing to the ne- 
cessity of yearly taking fresh land of an inferior 
quality into cultivation, and proceeding in the im- 
provement of old land, when it would return only the 
common profits of stock, with little or no rent ; so, in 
the latter case, the high proportion of rent is owing 
to the discouragement of a great expenditure in agri- 
culture, and the necessity of employing the reduced 
capital of the country in the exclusive cultivation of 
the richest lands, and leaving the remainder to yield 
what rent can be got for them in natural pasture, 
which, though small, will bear a large proportion to 
the labour and capital employed. In proportion, 
therefore, as the relative state of prices is such as to 
occasion a progressive fall of rents, more and more 
lands will be gradually thrown out of cultivation, the 
remainder will be worse cultivated, and the diminu- 



SEC. V.] OF THE RENT OF LAND. 143 

tion of produce will proceed still faster than the dimi- 
nution of rents. 

If the doctrine here laid down respecting the laws 
which govern the rise and fall of rents, be near the 
truth, the doctrine which maintains that, if the pro- 
duce of agriculture were sold at such a price as to 
yield less neat surplus, agriculture would be equally 
productive to the general stock, must be very far from 
the truth. With regard to my own conviction, in- 
deed, I feel no sort of doubt that if, under the impres- 
sion that the high price of raw produce, which occa- 
sions rent, is as injurious to the consumer as it is ad- 
vantageous to the landlord, a rich and improved na- 
tion were determined by law to lower the price of 
produce, till no surplus in the shape of rent any 
where remained, it would inevitably throw not only 
all the poor land, but all except the very best land, 
out of cultivation, and probably reduce its produce 
and population to less than one-tenth of their former 
amount. 



SECTION V. 



On the Dependance of the actual Quantity of Produce obtain- 
ed from the Land, upon the existing Rents and the existing 
Prices, 

From the preceding account of the progress of rent, 
it follows that the actual state of the natural rent of 
land is necessary to the actual produce ; and that the 
price of corn, in every progressive country, must be 
just about equal to the cost of production on land 
of the poorest quality actually in use, with the addi- 
tion of the rent it would yield in its natural state ; or 
to the cost of raising additional produce on old land, 
which additional produce yields only the usual re- 
turns of agricultural stock with little or no rent. 



144 OF THE RENT OF LAND. [CH. III. 

It is quite obvious that the price cannot be less ; or 
such land would not be cultivated, nor such capital 
employed. Nor can it ever much exceed this price, 
because it will always answer to the landlord to con- 
tinue letting poorer and poorer lands, as long as he 
can get any thing more than they will pay in their 
natural state ; and because it will always answer to 
any farmer who can command capital, to lay it out 
on his land, if the additional produce resulting from 
it will fully repay the profits of his stock, although it 
yields nothing to his landlord. 

It follows then, that the price of corn, in reference 
to the whole quantity raised, is sold at the natural or 
necessary price, that is, at the price necessary to ob- 
tain the actual amount of produee, although by far 
the largest part is sold at a price very much above 
that which is necessary to its production ; owing to 
this part being produced at less expense, while its ex- 
changeable value remains undiminished. 

The difference between the price of corn and the 
price of manufactures, with regard to natural or ne- 
cessary price, is this ; that if the price of any manu- 
facture were essentially depressed, the whole manu- 
facture would be entirely destroyed ; whereas, if the 
price of corn were essentially depressed, the quantity 
of it only would be diminished. There would be 
some machinery in the country still capable of send- 
ing the commodity to market at the reduced price. 

The earth has been sometimes compared to a vast 
mac hine, presented by nature to man for the produc- 
tion of food and raw materials ; but, to make the re- 
semblance more just, as far as they admit of compari- 
son, we should consider the soil as a present to man 
of a great number of machines, all susceptible of con- 
tinued improvement by the application of capital to 
them, but yet of very different original qualities and 

powers. 

This great inequality in the powers of the machi- 
nery employed in producing raw produce, forms one 



SEC. V.] OF THE RENT OF LAND. 145 

of the most remarkable features which distinguishes 
the machinery of the land from the machinery em- 
ployed in manufactures. 

When a machine in manufactures is invented, 
which will produce more finished work with less la- 
bour and capital than before, if there be no patent, 
or as soon as the patent has expired, a sufficient num- 
ber of such machines may be made to supply the 
whole demand, and to supersede entirely the use 
of all the old machinery. The natural consequence 
is, that the price is reduced to the price of production 
from the best machinery, and if the price were to be 
depressed lower, the whole of the commodity would 
be withdrawn from the market. 

The machines which produce corn and raw ma- 
terials, on the contrary, are the gifts of nature, not 
the works of man ; and we find, by experience, that 
these gifts have very different qualities and powers. 
The most fertile lands of a country, those which, like 
the best machinery in manufactures, yield the great- 
est products with the least labour and capital, are 
never found sufficient, owing to the second main 
cause of rent before stated, to supply the effective de- 
mand of an increasing population. The price of raw 
produce, therefore, naturally rises till it becomes suf- 
ficiently high to pay the cost of raising it with inferi- 
or machines, and by a more expensive process ; and, 
as there cannot be two prices for corn of the same 
quality, all the ether machines, the working of which 
requires less capital compared with the produce, must 
yield rents in proportion to their goodness. 

Every extensive country may thus be considered 
as possessing a gradation of machines for the produc- 
tion of corn and raw materials, including in this 
gradation not only all the various qualities of poor 
land, of which every large territory has generally an 
abundance, but the inferior machinery which may be 
said to be employed when good land is further and 
further forced for additional produce. As the price of 

19 



146 OF THE RENT OF LAND. [CH. III. 

raw produce continues to rise, these inferior machines 
are successively called into action ; and as the price 
of raw produce continues to fall, they are successive- 
ly thrown out of action. The illustration here used 
serves to shew at once the necessity of the actual 
price of corn to the actual produce, in the existing 
state of most of the countries with which we are ac- 
quainted, and the different effect which would attend 
a great reduction in the price of any particular manu- 
facture, and a great reduction in the price of raw 
produce. 

We must not however draw too large inferences 
from this gradation of machinery on the land. It is 
what actually exists in almost all countries, and ac- 
counts very clearly for the origin and progress of rent, 
while land still remains in considerable plenty. But 
such a gradation is not strictly necessary, either to the 
original formation, or the subsequent regular rise of 
rents. All that is necessary to produce these effects, 
is, the existence of the two first causes of rent for- 
merly mentioned, with the addition of limited territo- 
ry, or a scarcity of fertile land. 

Whatever may be the qualities of any commodity, 
it is well known that it can have no exchangeable 
value, if it exists in a great excess above the wants of 
those who are to use it. But such are the qualities 
of the necessaries of life that, in a limited territory, 
and under ordinary circumstances, they cannot be 
permanently in excess ; and if all the land of such a 
country were precisely equal in quality, and all very 
rich, there cannot be the slightest doubt, that after the 
whole of the land had been taken into cultivation, both 
the profits of stock, and the real wages of labour, 
would go on diminishing, till profits had been reduced 
to what were necessary to keep up the actual capital, 
and the wages to what were necessary to keep 
up the actual population, while the rents would be 
high, just in proportion to the fertility of the soil. 



SEC. V.] OF THE RENT OF LAND. 147 

Nor would the effect be essentially different, if the 
quantity of stock which could be employed with ad- 
vantage upon such fertile soil, were extremely limited, 
so that no further capital were required for it than 
what was wanted for ploughing and sowing. Still 
there can be no doubt that capital and population 
might go on increasing in other employments, till they 
both came to a stand, and rents had reached the limits 
prescribed by the powers of the soil, and the habits 
of the people. 

In these cases it is obvious that the rents are not 
regulated by the gradations of the soil, or the differ- 
ent products of capital on the same land ; and that it is 
too large an inference from the theory of rent to con- 
elude with Mr. Ricardo, that " It is only because land 
is of different qualities with respect to its productive 
powers, and because in the progress of population, land 
of an inferior quality, or less advantageously situated, 
is called into cultivation, that rent is ever paid for the 
use of it."* 

There is another inference which has been drawn 
from tbe theory of rent, which involves an error of 
much greater importance, and should therefore be 
very carefully guarded against. 

In the progress of cultivation, as poorer and poor- 
er land is taken into tillage, the rate of profits must 
be limited in amount by the powers of the soil last 
cultivated, as will be shewn more fully in a subsequent 
chapter. It has been inferred from this, that when 
land is successively thrown out of cultivation, the 
rate of profits will be high in proportion to the supe- 
rior natural fertility of the land which will then be 
the least fertile in cultivation. 

If land yielded no rent whatever in its natural 
state, whether it were poor or fertile, and if the rela- 
tive prices of capital and produce remained the same, 

* Principles of Political Economy, ch. ii. p. 54. This passage was copied frona 
the first edition. It is slightly altered in the second, p. 51. but not so as materially 
to vary the sense. 



148 OF THE RENT OF LAND. [CH. IU. 

then the whole produce being divided between pro- 
fits and wages, the inference might be just. But the 
premises are not such as are here supposed. In a 
civilized country uncultivated land always yields a 
rent in proportion to its natural power of feeding 
cattle or growing wood ; and of course, when land 
has been thrown out of tillage, particularly if this 
has been occasioned bv the importation of cheaper 
corn from other countries, and consequently without 
a diminution of population, the last land so thrown 
Out may yield a moderate rent in pasture, though 
considerably less than before. As was said in the 
preceding section, rent will diminish, but not so 
much in proportion either as the capital employed 
on the land, or the produce derived from it. No 
landlord will allow his land to be cultivated by a til- 
lage farmer paying little or no rent, when by laying 
it down to pasture, and saving the yearly expendi- 
ture of capital upon it, he can obtain a much greater 
rent. Consequently, as the produce of the worst 
lands actually cultivated can never be wholly divided 
between profits and wages, and in the case above 
supposed, not nearly so, the state of such land or its 
degree of fertility cannot possibly regulate the rate of 
profits upon it. 

If to this circumstance we add the effect arising 
from a rise in the value of money, and the probable 
fall of corn more than of working cattle, it is obvi- 
ous that permanent difficulties will be thrown in the 
way of cultivation, and that richer land may not 
yield superior profits. The higher rent paid for the 
last land employed in tillage, together with the great- 
er expense of the materials of capital compared with 
the price of produce, may fully counterbalance, or 
even more than counterbalance, the difference of na- 
tural fertility. 

With regard to the capital which the tenant may 
lay out on his farm in obtaining more produce with- 
out paying additional rent for it, the rate of its re- 



SEC. V.] OF THE RENT OF LAND. 149 

turns must obviously conform itself to the general 
rate of profits. If the prices of manufactured and 
mercantile commodities were to remain the same not- 
withstanding the fall of labour, profits would cer- 
tainly be raised ; but they would not remain the same, 
as was shewn in the preceding chapter. The new 
prices of commodities and the new profits of stock 
would be determined upon principles of competition ; 
and whatever the rate was, as so determined, capital 
Wou'd be taken from the land till this rate was attgiq- 
ed. The profits of capital employed in the way ;ust 
described must always follow, and can never lead or 
regulate. 

It should be added, that in the regular progress of 
a country towards general cultivation and improve- 
ment, and in a natural state of things, it may fairly 
be presumed, that if the last land taken into cultiva- 
tion be rich, capital is scarce, and profits will then 
certainly be high; but if land be thrown out of 
cultivation on account of means being found of ob- 
taining corn cheaper elsewhere, no such inference is 
justifiable. On the contrary, capital may be abun- 
dant, compared with the demand for corn and com- 
modities, in which case and during the time that such 
abundance lasts, whatever may be the state of the 
land, profits must be low. 

This is a distinction of the greatest practical im- 
portance, which it appears to me has been quite over- 
looked by Mr. Ricardo. 

It will be observed, that the rents paid for what the 
land will produce in its natural state, though they 
make a most essential difference in the questions re- 
lating to profits and the component parts of price, 
in no respect invalidate the important doctrine that, 
in progressive countries in their usual state with gra- 
dations of soil, corn is sold at its natural or necessa- 
ry price, that is, at the price necessary to bring the 
actual quantity to market. This price must on an 
average be at the least equal to the costs of its produc- 



150 OF THE RENT OF LAND. [CH. III. 

tion on the worst' land actually cultivated, together 
with the rent of such land in its natural state : be- 
cause, if it falls in any degree below this, the culti- 
vator of such land will not be able to pay the land- 
lord so high a rent as he could obtain from the land 
without cultivation, and consequently the land will 
be left uncultivated, and the produce will be dimin- 
ished. The rent of land in its natural state is there- 
fore obviously so necessary a part of the price of a 
cultivated products, that, if it be not paid they will 
not come to market, and the real price actually paid 
for corn is, on an average, absolutely necessary to 
the production of the same quantity, or, in the words 
before stated, corn, in reference to the whole quan- 
tity produced, is sold at its necessary price. 

I hope to be excused for presenting to the reader 
in various forms the doctrine, that corn, in reference 
to the quantity actually produced, is sold at its neces- 
sary price, like manufactures ; because I consider it 
as a truth of high importance, which has been en- 
tirely overlooked by the Economists, by Adam kmitn, 
and all those writers who have represented raw pro- 
duce as selling always at a monopoly price. 



SECTION VI. 



Of the Connexion between great comparative Wealth, and 
a high comparative Price of raw Produce. 

Adam Smith has very clearly explained in what man- 
ner the progress f wealth and improvement tends to 
raise the price of cattle, poultry the materials of 
clothing and lodging, the most useful minerals, &c. 
compared with corn ; but he has not entered in to the 
explanation of the natural causes which tend to de- 
termine the price of corn. He has left the reader 



SEC. VI.] OF THE RENT OF LAND. 151 

indeed to conclude, that he considers the price of 
corn as determined only by the state of the mines, 
which at the time supply the circulating medium of 
the commercial world. But this is a cause, which, 
though it may account for the high or low price of 
corn positively, cannot account for the relative dif- 
ferences in its price, in different countries, or compar- 
ed with certain classes of commodities in the same 
country. 

I entirely agree with Adam Smith, that it is of 
great use to inquire into the causes of high price, as 
from the result of such inquiries it maj turn out, 
that the very circumstance of which we complain 
may be the necessary consequence and the most cer- 
tain sign of increasing wealth and prosperity. But 
of all inquiries of this kind, none surely can be so 
important, or so generally interesting, as an inquiry 
into the causes which affect the price of corn, and 
occasion the differences in this price so observable in 
different countries. 

These causes, in reference to the main effects ob- 
served, seem to be two : 

i„ !i;ffi di f erenCein the 7 a,ue of the precious metals, 
9 t re "l. counm ? s > « nder differe n* circumstances. 
2. A difference m the quantity of labour and capi- 
tal necessary to produce corn. 

The first cause undoubtedly occasions the greatest 
portion of that inequality in the price of cornf which 
is the most striking and prominent, particu arly in 

Wa" *\l C °f der u able dis "™e from each ofher 
More than three-fourths of the prodigious difference 
between the price of corn in Bengal and EngS is 
probably occasioned by the difference in the value of 
money m the two countries ; and far the greater part 
of the high price of corn in this countryf compared 

rame Tfv Tr tatCS ^ E " r °P e ' is OC ™ d £ K 
same way. 1 he mam causes which affect the pre- 
cious metals ,n different countries, are the greate? or 
smaller demand for corn and labour, and the abun- 



152 



OF THE RENT OF LAND. [CH. HI. 



dance or deficiency of exportable commodities. With 
Seat facility of production in particular branches of 
Est y" orf in other words, an abundance of expor- 
table commodities, corn and labour ■ «y be , mmnta m 
ed at a very high comparative price ; and in tact it is 
rhis high price Specifically, which prevents the natural 
advant S age P attached to facility of production from be- 
tag fa a great degree lost by domestic compet.t.on 
an°d practtcally renders the industry of all those na- 
tionsfwhere corn and labour are high, peculiarly pro- 
ductive in the purchase of foreign commodities. But 
iTs subject shall be more fully discussed on another 
occasion. Our principal busmess at present ,s with 
the second of the two causes before stated. 

The second cause of the high comparative price of 
corn is the high comparative cost of Faction. If 
we could suppose the value of money to be the same 
£ al counties, then the cause of the higher m^ey 
mice of corn in one country compared with another, 
Sd be 7e greater quantity of capital ^ labour, 
which must be employed to produce it: and the ,ea 
Ton why the price of corn would be h.gner, and con- 
taually y rising in countries already rich, and stil ad- 
vancing in prosperity and population, wou d be to be 
found in the necessity of resortmg constancy t poor 
er land— to machines which would require a greater 
expenditureTo work them-and which would conse- 
Sy occasion each fresh addition to the raw pro- 
duce of the country to be purchased at a gieater cost 
5 Ion, it would be. fo\md in the i piP ortant mith 
that corn, in a progressive country is sold £ the price 
necessary to yield the actual suppl ;a rtdtha t, as ttas 
supply becomes more and more difficult, the puce 
must rise in proportion. 

The price of corn, as determined by this cause, 
will of course be greatly modified by other c.rcum- 
lances; by direct Ind indirect taxation ; by improve- 
ments in the modes of cultivation; by the sav g ot 
labour on the land ; and particularly by the importa- 



SEC. VI.] OF THE RENT OF LAND. 153 

tions of foreign corn. The latter cause, indeed, may 
do away, in a considerable degree, the usual effects of 
great wealth on the price of corn ; and this wealth 
will then shew itself in a different form. 

Let us suppose seven or eight large countries not 
very distant from each other, and not very differently 
situated with regard to the mines. Let us suppose 
further, that neither their soils nor their skill in agri- 
culture are essentially unlike ; that their currencies 
are m a natural state ; their taxes nothing ; and that 
every trade is free, except the trade in corn. Let us 
now suppose one of them very greatly to increase in 
capital and manufacturing skill above the rest, and to 
become in consequence much more rich and populous. 
J should say, that this comparative increase of riches 
could not possibly take place, without a comparative 
advance in the price of raw produce ; and that such 
advance of price would, under the circumstances sup- 
posed, be the natural sign and absolutely necessary 
consequence, of the increased wealth and population 
ot the country in question. 

Let us now suppose the same countries to have the 
most perfect freedom of intercourse in corn, and the 
expenses of freight, &c. to be quite inconsiderable : 
And let us still suppose one of them to increase very 
greatly above the rest, in manufacturing capital and 
skill, m wealth and population : I should then say, 
that as jthe importation of corn would prevent any 
great difference in the price of raw produce, it would 
prevent any great difference in the quantity of capital 
Jaid out upon the land, and the quantity of corn ob- 
tained from it ; that consequently, the great increase 
ot wealth could not take place without a great depen- 
dence on the other nations for corn ; and that this de- 
pendence, under the circumstances supposed, would 
pe the natural sign and necessary consequence of the 

increased wealth and population of die country in 
Question. 



question 

20 



154 OF THE RENT OF LAND. [CH. III. 

These I consider as the two alternatives necessarily 
belonging to a great comparative increase of wealth ; 
and the supposition here made will, with proper al- 
lowances, apply to the state of Europe. 

In Europe, the expenses attending the carriage ot 
corn are often considerable. They form a natural 
barrier to importation ; and even the country, which 
habitually depends upon foreign corn, must have the 
price of its raw produce considerably higher than the 
general level. Practically, also, the prices of raw pro- 
duce in the different countries of Europe will be va- 
riously modified by very different soils, very different 
degrees of taxation, and very different degrees of im- 
provement in the science of agriculture. Heavy taxa- 
tion, and a poor soil, may occasion a high compara- 
tive price of raw produce, or a considerable depen- 
dence on other countries, without great wealth and 
population ; while great improvements in agriculture 
and a good soil may keep the price of produce low, 
and the country independent of foreign corn, in spite 
of considerable wealth. But the principles laid down 
are the general principles on the subject; and in ap- 
plying them to any particular case, the particular cir- 
cumstances of such case must always be taken into 

the consideration. . , 

With regard to improvements in agriculture, which 
in similar soils is the great cause which retards the 
advance of price compared with the advance ot pro- 
duce ; although they are sometimes most powerful, 
and of very considerable duration, they cannot finally 
be sufficient to balance the necessity of applying to 
poorer land, or inferior machines. In this respect, 
raw produce is essentially different from manufac- 

turps 

The cost of manufactures, or the quantity of labour 
and capital necessary, to produce a given quantity ol 
them, has a constant tendency to dimmish ; while the 
quantity of labour and capital necessary to procure 
the last addition which has been made to the raw 



SEC. VI.] OF THE RENT OF LAND. 155 

produce of a rich and advancing country, has a con- 
stant tendency to increase. 

We see in consequence, from the combined opera- 
tion of the two causes, which have been stated in this 
section, that in spite of continued improvements in 
agriculture, the money price of corn is generally the 
highest in the richest countries ; while in spite of this 
high price of corn and consequent high price of la- 
bour, the money price of manufactures still continues 
lower than in poorer countries. 

I cannot then agree with Adam Smith, in thinking 
that the low value of gold and silver is no proof of 
the wealth and flourishing state of the country where 
it takes place. Nothing of course can be 'inferred 
from it, taken absolutely, except the abundance of 
the mines ; but taken relatively, or in comparison 
with the state of other countries, much may be inferred 
from it. If we are to measure the value of the pre- 
cious metals in different countries, and at different 
periods in the same country, by the price of corn, as 
proposed by himself, it appears to me that whether 
we consider the first or second cause which has been 
referred to in this section, there are few more certain 
signs of wealth than the high average price of raw 
produce. With the value of money uniform in re- 
spect to cost, then, independently of importation and 
improvements in agriculture, the wealth and popula- 
tion of a country would be proportioned to the high 
price of its corn. And in the actual state of things, 
with great differences in the value of money, it may 
generally be presumed that those countries, which 
have the greatest abundance of exportable commodi- 
ties, are either rich, or in the way rapidly to become 
rich.* 

> * This conclusion may appear to contradict the doctrine of the level of the pre- 
cious metals And so it does, if by level be meant level of value estimated in the 
usual way. 1 consider that doctrine, indeed, as quite unsupported by facts. The pre- 
cious metals are always tending to a state of rest, or such a state of things as to make 
the. r movement unnecessary. But when this state of rest has been nearly attained 
and the exchanges of all countries are nearly at par, the value of the precious metals 
id different countries, estimated in corn and labour, or the mass of commodities, is 



156 OF THE RENT OF LAND. [cH. Ill* 

It is of importance to ascertain this point ; that we 
may not complain of one of the most certain proofs 
of the prosperous condition of a country. 



SECTION VII. 



On the Causes which may mislead the Landlord in letting his 
k Lands, to the Injury both of himself and the Country. 

In the progress of a country towards a high state of 
improvement, the positive wealth of the landlord 
ought, upon the principles which have been laid 
down, gradually to increase; although his relative 
condition and influence in society will probably rather 
diminish, owing to the increasing number and wealth 
of those who live upon a still more important sur- 
plus* — the profits of stock. ; . 

The progressive fall, with few exceptions, in the 
value of the precious metals throughout Europe; the 
still greater fall, which has occurred in the richest 
countries, together with the increase of produce which 
has been obtained from the soil, must all conduce to 
make the landlord expect an increase of rents on the 
renewal of his leases. But, in re-letting his farms, 
he is liable to fall into two errors, which are almost 
equally prejudicial to his own interests, and to those 

of his country. , . 

In the first place, he may be induced, by the im- 
mediate prospect of an exorbitant rent, offered by 

<■ • a Vf. nm uin, tV.P same To he convinced of this, it is only necessary 

most unlike his usual attention to found his theories on facts. 
are, beyond all question, the main source of accumulation. 



SEC. VII.] OF THE RENT OF LAND. 157 

farmers bidding against each other, to let his land to 
a tenant without sufficient capital to cultivate it in 
the best way, and make the necessary improvements 
upon it. This is undoubtedly a most short-sighted 
policy, the bad effects of which have been strongly 
noticed by the most intelligent land-surveyors in the 
evidence lately brought before Parliament ; and have 
been particularly remarkable in Ireland, where the 
imprudence of the landlords in this respect, combin- 
ed perhaps with some real difficulty of finding sub- 
stantial tenants, has aggravated the discontents of the 
country, and thrown the most serious obstacles in the 
way of an improved system of cultivation. The 
consequence of this error is the certain loss of all 
that future source of rent to >he landlord, and wealth 
to the country, which arises from increase of pro- 
duce. 

The second error to which the landlord is liable, is 
that of mistaking a mere temporary rise of prices, 
for a rise of sufficient duration to warrant an in- 
crease of rents. It frequently happens that a scarci- 
ty of one or two years, or an unusual demand arising 
from any other cause, may raise the price of raw 
produce to a height at which it cannot be maintained. 
And the farmers, who take land under the influence 
of such prices, will, on the return of a more natural 
state of things, probably fail, and leave their farms 
in a ruined and exhausted state. These short peri- 
ods of high price are of great importance in generat- 
ing capital upon the land, if the farmers are allowed 
to have the advantage of them ; but if they are grasp- 
ed at prematurely by the landlord, capital is destroy- 
ed instead of being accumulated ; and both the land- 
lord and the country incur a loss, instead of gaining 
a benefit. 

A similar caution is necessary in raising rents, even 
when the rise of prices seems as if it would be per- 
manent. In the progress of prices and rents, rent 
ought always to be a little behind ; not only to af- 



158 OF THE RENT OF LAND. [t'H. Ilf. 

ford the means of ascertaining whether the rise be 
temporary or permanent, but even in the latter case, 
to give a little time for the accumulation of capital on 
the land, of which the landholder is sure to feel the 
full benefit in the end. 

There is no just reason to believe, that if the 
landlords were to give the whole of their rents to 
their tenants, corn would be more plentiful and 
cheaper. If the view of the subject, taken in the 
preceding inquiry, be correct, the last additions made 
to our home produce are sold at nearly the cost of 
production, and the same quantity could not be pro- 
duced from our own soil at a less price, even without 
rent. The effect of transferring all rents to tenants, 
would be merely the turning them into gentlemen, 
and tempting them to cultivate their farms under the 
superintendence of careless and uninterested bailiffs, 
instead of the vigilant eye of a master, who is de- 
terred from carelessness by the fear of ruin, and 
stimulated to exertion by the hope of a competence. 
The most numerous instances of successful industry, 
and well-directed knowledge, have been found among 
those who have paid a fair rent for their lands ; who 
have embarked the whole of their capital in their un- 
dertaking ; and who feel it their duty to watch over it 
with unceasing care, and add to it whenever it is pos- 
sible. 

But when this laudable spirit prevails among a 
tenantry, it is of the very utmost importance to the 
progress of riches, and the permanent increase of 
rents, that it should have the power as well as the 
will to accumulate; and an interval of advancing 
prices, not immediately followed by a proportionate 
rise of rents, furnishes the most effective powers of 
this kind. These intervals of advancing prices, when 
not succeeded by retrograde movements, most pow- 
erfully contribute to the progress of national wealth. 
And practically I should say, that when once a cha- 
racter of industry and economy has been established, 
temporary high profits are a more frequent and pow- 



SEC. VII.] OF THE RENT OF LAND. 159 

erful source of accumulation than either an increas- 
ed spirit of saving, or any other cause that can be 
named.* It is the only cause which seems capable 
of accounting for the prodigious accumulation among 
individuals, which must have taken place in this 
country during the last war, and which left us with 
a greatly increased capital, notwithstanding the vast 
annual destruction of stock, for so long a period. 

Among the temporary causes of high price, which 
may sometimes mislead the landlord, it is necessary 
to notice irregularities in the currency. , When they 
are likely to be of short duration, they must be treat- 
ed by the landlord in the same manner as years of 
unusual demand. But when they continue so long 
as they have done in this country, it is impossible 
for the landlord to do otherwise than to regulate his 
rent accordingly, and take the chance of being obli- 
ged to lessen it again, on the return of the currency 
to its natural state. 

With the cautions here noticed in letting farms, the 
landlord may fairly look forward to a gradual and 
permanent increase of rents; and, in general, not 
only to an increase proportioned to the rise in the 
price of produce, but to a still further increase, arising 
from an increase in the quantity of produce. 

If in taking rents, which are equally fair for the 
landlord and tenant, it is found that in successive 
lettings, they do not rise rather more than in propor- 
tion to the price of produce, it will generally be owing 
to heavy taxation. 

Though it is by no means true, as stated by the 
Economists, that all taxes fall on the neat rents of the 
landlords, yet it is certainly true that they have little 
power of relieving themselves. It is also true that 
they possess a fund more disposable, and better adap- 

toK^lvV^RSS^*" ° CCa8, ° n « xtrava S aDCP * h »* generally, I ahoild say, 
inat extravagant babits were a more frequent cause of a scarcity of camta! an J 
b.gh profits, than high profits of extravagant habits. 7 P " 



160 OF THE RENT OF LAND. [CH. III. 

ted for taxation than any other. They are in conse- 
quence more frequently' taxed, both directly and in- 
directly. And .if they pay, as they certainly do, 
many of the taxes which fall on the capital of the 
farmer and the wages of the labourer, as well as 
those directly imposed on themselves, they must ne- 
cessarily feel it in the diminution of that portion of 
the whole produce, which under other circumstances 
would have fallen to their share. 



SECTION VIII. 

On the strict and necessary Connexion of the Interests oj 
the Landlord and of the State in a Country which sup- 
ports its own Population. 

It has been stated by Adam Smith, that the interest 
of the landholder is closely connected with that of 
the state ;* and that the prosperity or adversity of 
the one involves the prosperity or adversity of the 
other. The theory of rent, as laid' down in the pre- 
sent chapter, seems strongly to confirm this statement. 
If under any given natural resources in land, the 
main causes which conduce to the interest of the 
landholder are increase of capital, increase of po- 
pulation, improvements in agriculture, and an in- 
creasing demand for raw produce occasioned by the 
prosperity of commerce, it seems scarcely oossible 
to consider the interests of the landlord as separated 
from those of the state and people. 

Yet it has been said by Mr. Ricardo that, " the in- 
terest of the landlord is always opposed to that of the 
consumer and the manufacturer,' >t that is, to all the 

* Wealth of Nations, Book I. c. xi. r S94 tfh edit, 
f Princ. of Polit. Ecoo. c xxiv. p. 423. 2d edit. 



SEC. VIII.] OF THE RENT OF LAND. 161 

other orders in he state. To this opinion he has 
been led, very consistently, by the peculiar view he 
has taken of rent, which makes him state, that it is 
for the interest of the landlord that the cost attending 
the production of corn should be increased,* and that 
improvements in agriculture tend rather to lower than 
to raise rents. 

If this view of the theory of rent were just, and it 
were really true, that the income of the landlord is 
increased by increasing the difficulty, and diminished 
by diminishing the facility, of production, the opi- 
nion would unquestionably be well founded. But if, 
on the contrary, the landlord's income is practically 
found to depend upon natural fertility of soil, im- 
provements in agriculture, and inventions to save la- 
bour, we may still think, with Adam Smith, that 
the landlord's interest is not opposed to that of the 
country. 

It is so obviously true, as to be hardly worth stat- 
ing, that if land of the greatest fertility were in such 
excessive plenty compared with the population, that 
every man might help himself to as much as he want- 
ed, there would be no rents or landlords properly so 
called. It will also be readily allowed, that if in this 
or any other country you could suppose the soil sud- 
denly to be made so fertile, that a tenth part of the 
surface, and a tenth part of the labour now employed 
upon it could more than support the present popula- 
tion, you would for some time considerably lower rents. 
But it is of no sort of use to dwell upon, and draw 
general inferences from suppositions which never can 
take place. 

What we want to know is, whether, living as we 
do in a limited world, and in countries and districts 
still more limited, and under such physical laws relat- 
ing to the produce of the soil and the increase of 
population as are found by experience to prevail, the 

* Frinc of Polit. Eccn. c. xxiv. p. 423. 2d edit 

21 



152 OF THE RENT OF LAND. [CH. Ill, 

interests of the landlord are generally opposed to 
those of the society. And in this view of the subject, 
the question may be settled by an appeal to the most 
incontrovertible principles confirmed by the most glar- 
ing facts. ; ■ . 

Whatever fanciful suppositions we may make 
about sudden improvements in fertility, nothing of 
this kind which we have ever seen or heard of in prac- 
tice, approaches to what we know of the power of 
population to increase up to the additional means ot 

subsistence. 

Improvements in agriculture, however considerable 
they may finally prove, are always found to be partial 
and gradual. And as, where they prevail to any ex- 
tent, there is always an effective demand for labour, 
the increase of population occasioned by the increas- 
ed facility of procuring food, soon overtakes the ad- 
ditional produce. Instead of land being thrown out 
of employment, more land is cultivated, owing to the 
cheapness of the instruments of cultivation, and un- 
der these circumstances rents must rise instead of tall. 
These results appear to me to be so completely con- 
firmed by experience, that I doubt, if a single in- 
stance in the history of Europe, or any other part ol 
the world, can be produced, where improvements in 
agriculture have been practically found to lower 

r pi its. 

1 should further say, that not only have improve- 
ments in agriculture never lowered rents, but that 
they have been hitherto, and may be expected to be 
in future, the main source of the increase of rents, m 
almost all the countries with which we are acquaint- 
ed 

'it is a fundamental part of the theory which has 
been explained in this chapter, that, as most countries 
consist of a gradation of soils, rents rise as cultiva- 
tion is pushed to poorer lands; but still the connex- 
ion between rent and fertility subsists in undiminish- 
ed force. The rich lands are those which yield the 



SEC. VIII.] OF THE RENT OF LAND. 163 

rents, not the poor ones. The poor lands are only 
cultivated, because the increasing population is call- 
ing forth all the resources of the country, and if 
there were no poor soils, these resources would still 
be called forth ; a limited territory, however fertile, 
would soon be peopled ; and without any increase of 
difficulty in the production of food, rents would 
rise. 

It is evident then, that difficulty of production has 
no kind of connexion with increase of rent, except 
as, in the actual state of most countries, it is the na~ 
tural consequence of an increase of capital and popu- 
lation, and a fall of profits and wages ; or, in other 
words, of an increase of wealth. 

But after all, the increase of rents which results 
from an increase of price occasioned solely by the 
greater quantity of labour and capital necessary to pro- 
duce a given quantity of corn on fresh land, is very much 
more limited than has been supposed ; and by a re- 
ference to most of the countries with which we are 
acquainted, it will be seen that, practically, improve- 
ments in agriculture and the saving of labour on the 
land, both have been, and may be expected in future 
to be, a much more powerful source of increasing 
rents. 

It has already been shewn, that for the very great 
increase of rents which have taken place in this coun- 
try during nearly the last hundred years, we are 
mainly indebted to improvements in agriculture, as 
profits have rather risen than fallen, and little or no- 
thing has been taken from the wages of families, if 
we include parish allowances, and the earnings of 
women and children. Consequently these rents must 
have been a creation from the skill and capital em- 
ployed upon the land, and not a transfer from profits 
and wages, as they existed nearly a hundred years 
ago. 

The peculiar increase of rents, which has taken 
place in the Highlands of Scotland during the last 



164 OF THE RENT OF LAND. [CH. Ill- 

half century, is well known to have been occasioned 
in a great degree by the saving of labour on the land. 
In Ireland, neither the wages of labour, nor the 
profits of stock on the land seem as if they could ad- 
mit of any considerable reduction ; but there can be 
no doubt that a great augmentation of rents might be 
effected by an improved system of agriculture, and a 
prosperous commerce, which, at the same time that it 
would sweep into flourishing cities the idlers which 
are now only half employed upon the land, would oc- 
casion an increasing demand for the products of ag- 
riculture, while the rates of profits and wages might 
remain as high as before. 

Similar observations may be made with regard to 
Poland, and indeed almost all the countries of Europe. 
There is not one, in which the real wages of labour 
are high, and scarcely one in which the profits of ag- 
ricultural stock are known to be considerable. If no 
improvements whatever in agriculture were to take 
place in these countries, and the future increase of 
their rents were to depend upon an increase of price 
occasioned solely by the increased quantity of labour 
necessary to produce food, I am inclined to think that 
the progress of their rents would be very soon stopped. 
The present rates of profits and wages are not such as 
would admit of much diminution ; and without in- 
creased skill in cultivation, and especially the saving 
of labour on the land, it is probable that no soils muck 
poorer than those which are at present in use, would 
pay the expense of cultivation. ■ 

Even the rich countries of India and Soutn Ameri- 
ca are not very differently circumstanced. From all 
the accounts we have received of these countries, 
cannot believe that agricultural profits are high, and 
it is certain that the real wages of labour are in gene- 
ral low. And though profits and wages are not to- 
p-ether so low as to prevent an increase of rents from 
an increase of cultivation without improvements m 
agriculture ; yet I conceive that their possible in- 
crease in this way would be quite trifling, compared 



SEC. VIII.] 0F THE RENT OF LAND. 165 

with what it might be under an improved system of 
cultivation, and a prosperous commerce, even without 
any transfer from the labourer or cultivator. 

The United States of America seem to be almost 
the only country with which we are acquainted, 
where the present wages of labour and the profits of 
agricultural stock are sufficiently high to admit of a 
considerable transfer to rents without improvements 
in agriculture. And probably it is only when the skill 
and capital of an old and industrious country are em- 
ployed upon a new, rich, and extensive territory, 
under a free government, and in a favourable situation 
for the export of raw produce, that this state of things 
can take place. 

In old states, experience tells us that wages may be 
extremely low, and the profits of the cultivator not 
high, while vast tracts of good land remain uncultivat- 
ed. It is obvious indeed, that an operose and igno- 
rant system of cultivation, combined with such a 
faulty distribution of property as to check the pro- 
gress of demand, might keep the profits of cultivation 
low, even in countries of the richest soil. And there 
is little doubt, from the very large proportion of peo- 
ple employed in agriculture in most unimproved ter- 
ritories, that this is a case which not un frequently 
occurs. But in all instances of this kind, it must be 
allowed, that the great source of the future increase 
of rents, will be improvements in agriculture and the 
demand occasioned by a prosperous external and in- 
ternal commerce, and not the increase of price occa- 
sioned by the additional quantity of labour required to 
produce a given quantity of corn. 

If, however, in a country which continues to grow 
nearly its own consumption of corn, or the same pro- 
portion of that consumption, it appears that every sort 
of improvement which has ever been known to take 
place in agriculture, manufactures or commerce, by 
which a country has been inriched, tends to increase 
rents, and every thing by which it is impoverished, tends 



166 OF THE RENT OF LAND. [CH. III. 

to lower them, it must be allowed that the interests of 
the landlord, and those of the state are, under the cir- 
cumstances supposed, absolutely inseparable. 

Mr. Ricardo, as I have before intimated, takes only 
one simple and confined view of the progress of rent. 
He considers it as occasioned solely by the increase of 
price, arising from the increased difficulty of produc- 
tion.* But if rents in many countries may be dou- 
bled or trebled by improvements in agriculture, while 
in few countries they could be raised a fourth or a fifth, 
and in some not a tenth, by the increase of price aris- 
ing from the increased difficulty of production, must 
it not be acknowledged, that such a view of rent em- 
braces only a very small part of the subject, and con- 
sequently that any general inferences from it must be 
utterly inapplicable to practice ? 

It should be further observed, in reference to im- 
provements in agriculture, that the mode in which 
Mr. Ricardo estimates the increase or decrease of 
rents is quite peculiar ; and this peculiarity in the use 
of his terms tends to separate his conclusions still far- 
ther from truth as enunciated in the accustomed lan- 
guage of political economy. 

In speaking of the division of the whole produce of 
the land and labour of the country between the three 
classes of landlords, labourers, and capitalists, he has 
the following passage. 

" It is not by the absolute quantity of produce ob- 
tained by either class, that we can correctly judge of 
the rate of profit, rent, and wages, but by the quanti- 
ty of labour required to obtain that produce. By im- 
provements in machinery and agriculture the whole 
produce may be doubled ; but if wages, rent and pro- 
fits be also doubled, they will bear the same propor- 
tions to one another as before. But if wages partook 

* Mr. Ricardo always seems to assume, that increased difficulties thrown in the 
way of production will be overcome by increased price, and that the same quantity 
will be produced But this is an unwarranted assumption. Where is the increased 
price to come from ? Vn increase of difficulty in the actual state of a country's 
resources will always tend to diminish produce. 



SEC. VIII.] OF THE RENT OF LAND. 167 

not of the whole of this increase ; if they, instead of 
being doubled, were only increased one half; if rent, 
instead of being doubled, were only increased three- 
fourths, and the remaining increase went to profit, it 
would, I apprehend, be correct for me to say, that 
rent and wages had fallen while profits had risen. 
For if we had an invariable standard by which to 
measure the value of this produce, we should find that 
a less value had fallen to the class of labourers and 
landlords, and a greater to the class of capitalists than 
had been given before."* 

A little farther on, having stated some specific pro- 
portions, he observes, " In that case I should say, 
that wages and rent had fallen and profits risen, 
though, in consequence of the abundance of commo- 
dities, the quantity paid to the labourer and landlord 
would have increased in the proportion of 25 to 44. "f 

In reference to this statement, I should observe, 
that if the application of Mr. Ricardo's invariable 
standard of value naturally leads to the use of such 
language, the sooner the standard is got rid of, the 
better, as in an inquiry into the nature and causes of 
the wealth of nations, it must necessarily occasion 
perpetual confusion and error. For what does it re- 
quire us to say ? We must say that the rents of the 
landlord have fallen and his interests have suffered, 
when he obtains as rent above three-fourths more 
of raw produce than before, and with that produce 
will shortly be able, according to Mr. Ricardo's own 
doctrines, to command three-fourths' more labour. 
In applying this language to our own country, we 
must say that rents have fallen considerably during 
the last forty years, because, though rents have great- 
ly increased in exchangeable value, — in the command 
of money, corn, labour and manufactures, it appears, 
by the returns to the Board of Agriculture, that they 

* Princ. of Polit. Econ. chap. i. p. 43. 2d edit. f Id. p. 44. 



168 OF THE RENT OF LAND. [CH. III. 

are now only a fifth of the gross produce,* whereas 
they were formerly a fourth or a third. 

In reference to labour, we must say that it is low 
in America, although we have been hitherto in the 
habit of considering it as very high, both in money 
value and in the command of the necessaries and con- 
veniences of life. And we must call it high in Swe- 
den ; because, although the labourer only earns low 
money wages, and with these low wages can obtain 
but few of the necessaries and conveniences of life ; 
yet, in the division of the whole produce of a labori- 
ous cultivation on a poor soil, a larger proportion may- 
go to labour.f 

Into this unusual language Mr. Ricardo has been 
betrayed by the fundamental error of confounding cost 
and value, and the further error of considering raw 
produce in the same light as manufactures. It might 
be true, that if, by improvements in machinery, the 
produce of muslins were doubled, the increased quan- 
tity would not command in exchange a greater quan- 
tity of labour and of necessaries than before, and 
would have little or no effect therefore on population. 
But Mr. Ricardo has himself said, that " if improve- 
ments extended to all the objects of the labourer's 
consumption, we should find him probably, at the 
end of a very few years, in possession of only a small, 
if any addition to his enjoyments."! Consequently, 
according to Mr. Ricardo, population will increase in 
proportion to the increase of the main articles con- 
sumed by the labourer. 

* Reports from the Lojds on the Corn Laws, p. 66. 

f It is specifically this unusual application of common terms which has rendered 
Mr Ricardo's work so difficult to he understood by many people. It requires in- 
deed a constant and laborious effort of the mind to recollect at all times what is 
meant by high and low rents, and high or low wages. In other respects, it has al- 
ways appeared to me that the style in which the work is written, is perfectly clear. 
It is never obscure, but when either the view itself is erroneous, or terms are used 
in an unusual sense. 

\ Princ. of Polit. Econ. ch. i. p. 9. 



3EC. VIII.] OF THE RENT OF LAND. 169 

But if population increases according to the neces- 
saries which the labourer can command, the increased 
quantity of raw produce which falls to the share of 
the landlord must increase the exchangeable value of 
his rents estimated in labour, corn and commodities. 
And it is certainly by real value in exchange, and not 
by an imaginary standard, which is to measure pro- 
portions or cost in labour > that the rents and interests 
of landlords will be estimated. It would often hap- 
pen, that after improvements had been taking place, 
rents would rise according to the accustomed and 
natural meaning attached to the term, while they 
might fall according to the new mode of estimating 
them adopted by Mr. Ricardo. 

I need hardly say, that, in speaking of the interests 
of the landlord, I mean always to refer to what I 
should call his real rents and his real interests ; that 
is, his power of commanding labour, and the neces- 
saries and conveniences of life, whatever proportion 
these rents may form of the whole produce, or what- 
ever quantity of labour they may have cost in pro- 
ducing.* But in fact, improvements in agriculture 
tend, in a moderate time, even according to the con- 
cessions of Mr. Ricardo, to increase the proportion of 
the whole produce which falls to the landlord's share ; 
so that in any way we can view the subject, we must 
allow that, independently of the question of importa- 
tions, the interest of the landlord is strictly and ne- 
cessarily connected with that of the state. 

* This interpretation of the term rent is, I conceive, strictly consistent with my 
first definition of it. I call it that portion (not proportion) of the value of the pro- 
duce which goes to the landlord ; and if the value of the whole produce of any given 
quantity ct hnd increases, the portion of value which goes to the landlord may in- 
crease considerably, although the proportion which it bears to the whole may di- 
minish. Mr. Ricardo has himself expressly stated, p. 503. that whatever sum the 
produce of land sells for above the costs of cultivating it, is money rent. But if it 
continually happens that money rent rises, and is at the same time of greaJfr real 
value in exchange, although it bears a less proportion to the value of the whole pro- 
duce trom the land in question, it is quite obviou? that neither money rent nor real 
vent is regulated by this proportion. 

22 ■ 



170 Ol THE RENT OF LAND. [CH. III. 



SECTION IX. 

On the Connexion of the Interests of the Landlord and of 
the State, in Countries which import Corn. 

The *bnly conceivable doubt which can arise respect- 
ing the strictest union between the interest of the 
landlord and that of the state, is in the question of 
importation. And here it is evident, that at all 
events the landlord cannot be placed in a worse situa- 
tion than others, and by some of the warmest friends 
of the freedom of trade, he has justly been consider- 
ed as placed in a much better. No person has ever 
doubted that the individual interests of the manufac- 
tures of woollen, silk, or linen goods, might be in- 
jured by foreign competition ; and few would deny 
'that the importation of a large body of labourers 
would tend to lower wages. Under the most unfa- 
vourable view, therefore, that we can take of the 
subject, the case of the landlord with regard to im- 
portation is not separated from that of the other class- 
es of society. 

But it has been stated by no less an authority than 
that of Adam Smith, that the freest importation of 
corn and raw produce cannot injure the farmers and 
landlords f and it is almost universally allowed, that 
from the bulky nature of raw produce, it must neces- 
sarily be more protected from foreign competition 
than almost any other commodity. 

The statement of Adam Smith is unquestionably 
too strong. The other is strictly true. Yet still it 
must be acknowledged, that the individual interests 
of landlords may suffer from importation, though not 
nearly so much as the interests of some of the other 
classes of society. My reasons for thinking that, in 
some cases which are likely to occur, the diminution 
of rents which would be sustained in this way, 
would not be counterbalanced by proportionate ad- 

* Wealth of Nations, Book IV. ch. ii. p. 189. 6th edit. 



SEC. IX.] OF THE RENT OF LAND. 171 

vantages to the state, I have given at some length in 
the fifth edition of my Essay on the Principle of 
Population,* and to them I refer the reader. 

But I will add a remark, which, if just, is certain- 
ly very important ; namely, that the employment of 
capital upon the land in the way in which it is not 
unfrequently employed, appears to me the only con- 
siderable case where practically, and as the business 
is really conducted, the interest of the individual and 
of the state are not proportioned to each other. 

If land were always considered as a merchantable 
instrument, bought and sold merely with a view to 
the profit which might be made of it, and worked 
exclusively by the proprietors, every increase of value 
and power which the instrument might acquire from 
being used and improved, would naturally enter into 
the computation in deciding whether a capital might 
be more profitably employed on land, or in com- 
merce and manufactures ; and the advantage to the 
state, from the employment of such capital, would 
in general be proportioned in both cases to the ad- 
vantage gained by individuals. But, practically, this 
state of things rarely exists. A very large portion of 
the lands of most European countries is kept out of 
the market by the right of primogeniture, the prac- 
tice of entails, and the desire of maintaining a landed 
influence ; and that part which is purchased by the 
mercantile classes, and others who have acquired 
moveable property, is generally purchased rather with 
a view to secure a revenue from the wealth already 
gained, and a share in the influence of the old land- 
holders, than to the means of making or increasing 
their fortunes. The natural consequence of these ha- 
bits and feelings in the great body of landholders is, 
that the cultivation of the country must be chiefly 
carried on by tenants. And indeed it is allowed, that 
not only the common routine of farming is principal- 

* Vo!. ii. Book III. chap. xii. 



172 OF THE RENT OF LAND. [CH. III. 

ly conducted by persons who are not proprietors, but 
that even a very large part of the great permanent 
improvements in agriculture, and in the instruments 
and modes of cultivation which have so peculiarly 
distinguished the last thirty years, has been effected 
by the capitals of the same class of people. 

But if it be true, as I fully believe it is, that a very 
large part of the improvements which have taken 
place on the soil, has been derived from the capital, 
skill and industry of tenants, no truth can be more 
distinct and incontrovertible than that the advantage 
which such individuals have derived from a capital 
employed in agriculture, compared with a capital 
employed in commerce and manufactures, cannot 
have been proportioned to the advantages derived by 
the country ; or, in other words, that the interests of 
individuals in the employment of capital, have not 
in this case been identified with the interest of the 
state. 

This position will be made perfectly clear, if we 
examine attentively what would be the relative effect 
to the individual and the state of the employment of 
a capital of 10,000/, in agriculture, or in manufac- 
tures under the circumstances described. 

Let us suppose that a capital of 10,000/. might 
be employed in commerce or manufactures for twen- 
ty years, at a profit of about twelve per cent., and 
that the capitalist might retire, at the end of that 
term, with his fortune doubled. It is obvious that, 
to give the same encouragement to the employment 
of such a capital in agriculture, the same or nearly 
the same advantages must be offered to the individu- 
al. But in order to enable a person who employs his 
capital on rented land to convert his 10,000/. in the 
course of twenty years into 20,000/. it is certain that 
he must make annually higher profits, in order to 
enable him to recover that part of his capital which 
he has actually sunk upon the land, and cannot with- 
draw at the end of the term ; and then, if he has 



SEC. IX.] OF THE RENT OF LAND. 173 

been an essential improver, he must necessarily leave 
the land to his landlord, at the end of the lease, worth 
a considerably higher rent, independently of any 
change in the value of the circulating medium, than at 
the commencement of it. But these higher annual 
returns, which are necessary to the farmer with a tem- 
porary tenure to give him the common profits of 
stock, are continued, in part at least, in the shape of 
rent at the end of the lease, and must be so much 
gained by the state. 

In the case of the capital employed in commerce 
and manufactures, the profit to the state is proportion- 
ed to the profit derived by the individual; in the case 
of the capital employed in agriculture it is much 
greater ; and this would be true, whether the produce 
were estimated in money, or in corn and labour. In 
either way, under circumstances which in all proba- 
bility have actually occurred, the profits to the state 
derived from the capital employed in agriculture 
might be estimated perhaps at fourteen or fifteen per 
cent., while the profits to the individuals, in both cases 
may have been only twelve per cent. 

Sir John Sinclair, in his Husbandry of Scotland 
has given the particulars of a farm in East Lothian' 
in which the rent is nearly half the produce ; and the 
rent and profits together yield a return of fifty-six 
per cent, on the capital employed. But the rent and 
profits together are the real measure of the wealth 
derived by the country from the capital so employed ■ 
and as the farm described is one where the con- 
vertible husbandry is practised, a system in which the 
greatest improvements have been made of late years 
there is little doubt that a considerable part of this in- 
crease of wealth had been derived from the capital 
of the tenant who held the farm previous to the re- 
newal of the lease, although such increase of wealth 
to the state could not have operated as a motive 
of interest to the individual so employing his stock 
If then during the war no obstacles had occurred 
to the importation of foreign corn, and the profits of 



|74 OF THE RENT OF LAND. f CH * m * 

agriculture had in consequence been only ten per cent, 
while the profits of commerce and manufactures were 
twelve, the capital of the country would of course 
have flowed towards commerce and manufactures; 
and measuring the interest of the state, as usual, by 
the interest of individuals, this would have been a 
more advantageous direction of it, in the proportion 
of twelve to ten. But, if the view of the subject just 
taken be correct, instead of a beneficial direction ot 
it to a profit of twelve per cent, from a profit of ten 
per cent, as measured by the interests of the indi- 
viduals concerned, it might have been a disadvanta- 
geous direction of it to a profit of only twelve per 
cent, from a profit of fourteen per cent, as measured 
by the interest of the state, 

It is obvious therefore that the natural* restrictions 
upon the importation of foreign corn during the war, 
by forcibly raising the profits of domestic cultivation, 
may have directed the capital of the country into a 
channel more advantageous than that into which it 
would otherwise have flowed, and instead of impe- 
ding the progress of wealth and population, as at first 
one should certainly have expected, may have decid- 
edly and essentially promoted it. 

And this, in fact, such restrictions not only may, 
but must do, whenever the demand for corn grown at 
home is such, that the profits of capitals employed 
on the new lands taken into cultivation, joined to the 
rents which they generate, form together greater re- 
turns in proportion to the stock employed, than there- 
turns of the capitals engaged in commerce and manu- 
factures ; because, in this case, though foreign corn 
might be purchased, without these restrictions, at a 
cheaper money price than that at which it could 
be raised at home, it would not be purchased at so 

* It is of great importance always to recollect that the high price of corn froir 
1798 to 1814 was occasioned by the war and the seasons,— not hy corn-laws ; and 
that a country with open ports may be subjected to very great alternations of prn* 
in war and in peace 



SEC. IX.] OF THE REiNT OF LAND. 175 

small an expense of capital and labour,* which is 
the true proof of the advantageous employment of 
stock. 

But if the progress of wealth has been rather ac- 
celerated than retarded by such restrictions upon the 
importation of foreign corn, on account of the greater 
quantity of raw produce that has been purchased by 
a given quantity of capital and labour at home, than 
could have been purchased by the same quantity of 
capital and labour from abroad, it is quite obvious 
that the population must have been accelerated rather 
than retarded ; and certainly the unusually rapid in- 
crease of population which is known to have taken 
place during the last ten or fifteen years of the war 
so much beyond the average of the century, tends 
strongly to confirm this conclusion. 

The position here laid down may appear to be 
rather startling ; but the reader will see how it is li- 
mited. It depends for its general effects upon per- 
manent improvements being made by a capital which 
has only a temporary interest in the fruits of such im- 
provements ; and, in reference to restrictions upon 
importation, it depends upon the circumstance that 
these restrictions by the increased demand for the 
products of domestic agriculture which they create, 
should have the effect of occasioning improvements 
which would otherwise not have taken place. But 
neither of these usuaj concomitants are absolutely J 

necessary. 

Considerable quantities of capital might be employ- ] 

ed upon the land, and a temporary increase of demand I 

for domestic produce might take place, without 1 

* If restrictions upon importation necessarily increased the quantity of labour and 
capital required to obtain corn, they could not oi course be defended for a moment, 
with a view to wealth and productive power. But if by directing capital to the land 
they occasion permanent improvements, the whole question is changed. Permanent 
improvements in agriculture are like the acquisition of additional land. Even bow- 
ever, if they had no effect of this kind, they might be desirable on other grounds yet 
more important Late events must make us contemplate with no small alarm a great 
increase in the proportion of our manufacturing population, both with reference to the 
happiness and to the liberty of our country. 



176 OF THE RENT OF LAND. [CH. Ill, 

permanent improvements in agriculture. All that is 
meant to be said is, that when, under such circum- 
stances, permanent improvements in agriculture are 
re illy made, and rent is created, it is impossible to re- 
sist the conclusion, that to such extent the interest 
of the state in the exchangeable value created by such 
capital,* is decidedly greater than the interest of the 
individual. 

This consideration, combined with those before 
adverted to, may make it at least a matter of doubt, 
whether even in the case of restrictions upon the im- 
portation of foreign corn, the interest of the state may 
not sometimes be the same as that of the landlords. 
But no such doubt exists respecting a restriction upon 
the importation of other commodities. And when we 
add, that in a state of perfectly free intercourse, it is 
eminently the interest of those who live upon the 
rents of land, that capital and population should in- 
crease, while to those who live upon the profits of 
stock and the wages of labour, an increase of capital 
and population is, to say the least of it, a much more 
doubtful benefit ; it may be most safely asserted, that 
the interest of no other class in the state is so nearly 
and necessarily connected with its wealth and power, 
as the interest of the landlord. 



SECTION X. 

General Remarks on the Surplus Produce of the Land 

It seems rather extraordinary that the very great bene- 
fit which society derives from that surplus produce of 
the land which, in the progress of society, falls main- 

* I refer to exchangeable value and rate of profits, not to abundance of convenien- 
ces and luxuries. In almost all improvement? in machinery, the state is ultimately 
more benefited than the producers, but not in reference _to rate of profits and real 
value in exchange. 



SEC. X.] OF THE RENT OF LAND. 177 

ly to the landlord m the shape of rent, should not yet 
be fully understood and acknowledged. I have call- 
ed this surplus a bountiful gift of Providence, and am 
most decidedly of opinion, that it fully deserves the 
appellation. But Mr. Ricardo has the following pas- 
sage : — 

" Nothing is more common than to hear of the ad- 
vantages which the laud possesses over every other 
source of useful produce, on account of the surplus 
which it yields in the form of rent. Yet when land is 
most abundant, when most productive and most fertile, 
it yields no rent ; and it is only when its powers decay, 
and less is yielded in return for labour, that a share of 
the original produce of the more fertile portions is set 
apart for rent. It is singular that this quality in the 
land, which should have been noticed as an imperfec- 
tion, compared with the natural agents by which manu- 
factures are assisted, should have been pointed out as 
constituting its peculiar pre-eminence. If air, water, 
the elasticity of steam, and the pressure of the atmos- 
phere were of various qualities, if they could be ap- 
propriated, and each quality existed only in moderate 
abundance, they, as well as the land, would afford a 
rent, as the successive qualities were brought into use. 
With every worse quality employed, the value of the 
commodities in the manufacture of which they were 
used would rise, because equal quantities of labour 
would be less productive. Man would do more by 
the sweat of his brow, and nature perform less, and 
the land would be no longer pre-eminent for its limit- 
ed powers." 

" If the surplus produce which the land affords in 
the form of rent be an advantage, it is desirable that 
every year the machinery newly constructed should 
be less efficient than the old, as that would undoubted- 
ly give a greater exchangeable value to the goods 
manufactured, not only by'that machinery, but by all 
the other machinery in the kingdom ; and a rent 



178 OF THE RENT OF LAND. [CH. III. 

would be paid to all those who possessed the most 
productive machinery."* 

Now, in referring to a gift of Providence, we should 
surely speak of its value in relation to the laws and 
constitution of our nature, and of the world in which 
we live. But, if any person will take the trouble to 
make the calculation, he will see that if the necessa- 
ries of life could be obtained without limit, and the 
number of people could be doubled every twenty-five 
years, the population which might have been produc- 
ed from a single pair since the Christian sera, would 
have been sufficient, not only to fill the earth quite 
full of people, so that four should stand in every square 
yard, but to fill all the planets of our solar system in 
the same way, and not only them, but all the planets 
revolving round the stars which are visible to the nak- 
ed eye, supposing each of them to be a sun, and to 
have as many planets belonging to it as our sun has. 
Under this law of population, which, excessive as it 
may appear when stated in this way, is, I firmly be- 
lieve, best suited to the nature and situation of man, it 
is quite obvious that some limit to the production of 
food, or some other of the necessaries of life, must 
exist. Without a total change in the constitution of 
human nature, and the situation of man on earth, the 
whole of the necessaries of life could not be furnished 
in the same plenty as air, water, the elasticity of steam, 
and the pressure of the atmosphere. It is not easy to 
conceive a more disastrous present — one more likely 
to plunge the human race in irrecoverable misery, than 
an unlimited facility of producing food in a limited 
space. A benevolent Creator then, knowing the 
wants, and necessities of his creatures, under the laws 
to which he had subjected them, could not, in mercy, 
have furnished the whole of the necessaries of life in 
the same plenty as air and water. This shews at 
once the reason why the former are limited in quan- 
tity, and the latter poured out in profusion. But if it 

* Princ. of Polit. Econ. ch, i i. p. 59: 



SEC. X.] OF THE RENT OF LAND. 179 

be granted, as it must be, that a limitation in the 
power of producing food is obviously necessary to 
man confined to a limited space, then the value of the 
actual quantity of land which he has received, de- 
pends upon the small quantity of labour necessary to 
work it, compared with the number of persons which it 
will support ; or, in other words, upon that specific 
surplus so much under-rated by Mr. Ricardo, which 
by the laws of nature terminates in rent. 

If manufactured commodities, by the gradations of 
machinery supposed by Mr. Ricardo, were to yield a 
rent, man, as he observes, would do more by the 
sweat of his brow ;* and supposing him still to ob- 
tain the same quantity of commodities, (which, how- 
ever, he would not,) the increase of his labour would 
be in proportion to the greatness of the rent so 
created. But the surplus, which a given quantity of 
land yields in the shape of rent, is totally different. 
Instead of being a measure of the increase of labour, 
which is necessary altogether to produce the quantity 
of corn which the land can yield, it is finally an ex- 
act measure of the relief from labour in the produc- 
tion of food granted to him by a kind Providence. 
If this final surplus be small, the labour of a large 
portion of the society must be constantly employed in 
procuring, by the sweat of their brows, the mere 
necessaries of life, and society must be most scantily 
provided with convenient luxuries, and leisure ; while 
if this surplus be large, manufactures, foreign luxu- 
ries, arts, letters and leisure may abound. 

It is a little singular, that Mr. Ricardo, who has, in 
general, kept his attention so steadily fixed on perma- 
nent and final results, as even to define the natural 

* That is, supposing the gradations were towards worse machinery, some of which 
it was necessary to use, but not otherwise. The reason why manufactures and neces- 
saries will not admit of comparison with regard to rents is, that necessaries, in a 
limited territory, are always tend'iDg to the same exchangeable value, whether they 
have cost little or much labour ; but manufactures, if not subjected to an artificial 
monopoly, must fall with the facility of producing them VVe cannot therefore 
suppose the price to be given ; but if we could, facility of production would, in both 
eases, be equally a measure of relief from labour. 



180 OF THE RENT OF LAND. [CH. III. 

price of labour to be, that price which would maintain 
a stationary population, although such a price cannot 
generally occur under moderately good governments 
and in an ordinary state of things for hundreds of 
years, has always, in treating of rent, adopted an op- 
posite course, and referred almost entirely to tempo- 
rary effects. 

It is obviously with this sort of reference, that he 
has objected to Adam Smith for saying that, in rice 
countries a greater share of the produce would belong 
to the landlord than in corn countries, and that rents 
in this country would rise, if potatoes were to become 
the favourite vegetable food of the common people, in- 
stead of corn.* Mr. Ricardo could not but allow, 
indeed he has allowed,f that rents would be finally 
higher in both cases. But he immediately supposes 
that this change is put in execution at once, and re- 
fers to the temporary result of land being thrown out 
of cultivation. Even on this supposition however, 
all the lands which had been thrown up, would be 
cultivated again in a very much less time, than it 
would take to reduce the price of labour, in a natu- 
ral state of things, to the maintenance only of a sta- 
tionary population. And therefore, with a view to 
permanent and final results, which are the results 
which Mr. Ricardo has mainly considered throughout 
his work, he ought to have allowed the truth of Adam 
Smith's statements. 

But, in point of fact, there is every probability that 
not even a temporary fall of rent would take place. 
No nation ever has changed or ever will change the 
nature of its food all at once. The process, both in 
reference to the new system of cultivation to be 
adopted, and the new tastes to be generated, must 
necessarily be very slow. In the greater portion of 
Europe, it is probable, that a change from corn to 

* Wealth of Nations, vol. i. Book I. c. xi. pp. 248—250. 6tb edit 
f Piinc. of Polit. Ecoii. ch. xxiv. p. 423. 



SEC. X.] OF THE RENT OF LAND. 181 

rice could never take place; and where it could, it 
would require such great preparations for irrigation, 
as to give ample time for an increase of population 
fully equal to the increased quantity of food produc- 
ed In those countries where rice is actually grown 
the rents are known to be very high. Dr. Buchanan^ 
in his valuable travels through the Mysore, says, that 
in the watered lands below the Ghats, the government 
was in the habit of taking two-thirds of the crop.* 
This is an amount of rent which probably no lands 
cultivated in corn can ever yield ; and in those parts 
of India and other countries, where an actual change 
has taken place from the cultivation of corn to the 
cultivation of rice, I have little doubt that rents have 
not only finally risen very considerably, but have risen 
even during the progress of the change. 

With regard to potatoes, we have very near to us 
an opportunity of studying the effects of their becom- 
ing the vegetable food of the great mass of a people. 
The population of Ireland has increased faster, durin* 
the last hundred years, than that of any other country 
in Europe ; and under its actual government, this fact 
cannot be rationally accounted for, but from the in- 
troduction and gradual extension of the use of the 
potatoe. I am persuaded, that had it not been for 
the potatoe, the population of Ireland would not have 
more than doubled, instead of quadrupled, during the 
last century This increase of population has pre- 
vented lands from being thrown out of cultivation, or 
given greater value to natural pasture, at the same 
time that it has occasioned a great fall in the com- 
parative money wages of labour. This fall, expe- 
rience tells us, has not been accompanied by a pro- 
portionate rise of profits, and the consequence is a con- 
siderable rise of rents. The wheat, oats and cattle 
of Ireland are sold to England and bear English mo- 

* Vol. ii. p. 212. 



182 OF THE RENT OF LAND. [CH. III. 

ney prices, while they are cultivated and tended by 
labour paid at half the money price ; a state of things 
which must greatly increase either the revenue de- 
rived from profits, or the revenue derived from rents ; 
and practical information assures us, that it is the lat- 
ter which has derived the greatest benefit from it. 

I think, therefore, that though it must lead to 
great errors, not to distinguish very decidedly the 
temporary rates of wages from their final rates, it 
would lead to no such error to consider the tempora- 
ry effects of the changes of food which have been re- 
ferred to, as of the same kind with their final effects, 
that is, as tending always to raise rents. And I am 
convinced, that if we make our comparisons with any 
tolerable fairness, that is, if we compare countries 
under similar circumstances, with respect to extent, 
and the quantity of capital employed upon the soil, 
which is obviously the only fair mode of comparing 
them, we shall find that rent will be in proportion 
to the natural and acquired fertility of the land. 

If the natural fertility of this island had been 
double what it is, and the people had been equally 
industrious and enterprising, the country would, ac- 
cording to all just theory, have been at this time 
doubly rich and populous, and the rents of land much 
more than double what they are now. On the other 
hand, if the soil of the island had possessed only 
half its present fertility, a small portion of it only, 
as I stated on a former occasion, would have admit- 
ted of corn cultivation, the wealth and population of 
the country would have been quite inconsiderable, 
and rents not nearly one half of what they are now. 
But if, under similar circumstances, rent and fertility 
go together, it is no just argument against their 
natural connexion to say that rent is higher in Eng- 
land, where a great mass of capital has been employ- 
ed upon the land, than in the more fertile country of 
South America, where, on the same extent of tern- 



SEC. X.] OF THE RENT OF LAND. 183 

tory, not a twentieth part has been employed, and the 
population is extremely scanty. 

The fertility of the land, either natural or acquired, 
may be said to be the only source of permanently 
high returns for capital. If a country were exclu- 
sively manufacturing and commercial, and were to 
purchase ail its corn at the market prices of Europe, 
it is absolutely impossible that the returns for its capi- 
tal should for any great length of time be high. In 
the earlier periods of history, indeed, when large 
masses of capital were extremely rare, and were con- 
fined to a very few towns, the sort of monopoly 
which they gave to particular kinds of commerce 
and manufactures tended to keep up profits for a much 
longer time ; and great and brilliant effects were un- 
doubtedly produced by some states which were al- 
most exclusively commercial. But in modern Europe, 
the general abundance of capital, the easy intercourse 
between different nations, and the laws of domestic 
and foreign competition, prevent the possibility of large 
permanent returns being received for any other capi- 
tals than those employed on the land. No great 
commercial and manufacturing state in modern times, 
whatever may have been its skill, has yet been known 
permanently to make higher profits than the average 
of the rest of Europe. But the capitals successfully 
employed on moderately good land, may permanent- 
ly and without fear of interruption or check, some- 
times yield twenty per cent., sometimes thirty or 
forty, and sometimes even fifty or sixty per cent. 

A striking illustration of the effects of capitals em- 
ployed on land compared with others, appeared in 
the returns of the property-tax in this country. The 
taxable income derived from the capitals employed 
on land, was such as to yield to the property-tax nearly 
6i millions, while the income derived from the capi- 
tals employed in commerce and manufactures was 



134 OF THE RENT OF LAND. [CH. HI. 

only such as to yield two millions.* It is probably 
true, that a larger proportion of the incomes derived 
from the capitals employed in trade and manufac- 
tures, escaped the tax, partly from their subdivision, 
and partly from other causes ; but the deficiency so 
occasioned could in no respect make up for the ex- 
traordinary productiveness of the capitals employed 
in agriculture.f And indeed it is quite obvious that, 
in comparing two countries together with the same 
capitals and the same rate of profits, one of which 
has land on which to grow its corn, and the other is 
obliged to purchase it, that which has the land, par- 
ticularly if it be fertile, must be much richer, more 
populous, and have a larger disposable income for 

taxation. 

Another most desirable benefit belonging to a fer- 
tile soil is, that states so endowed are not obliged to 
pay much attention to that most distressing and dis- 
heartening of all cries to every man of humanity — 
the cry of the master manufacturers and merchants 
for low wages, to enable them to find a market for 
their exports. If a country can only be rich by run- 
ning a successful race for low wages, I should be dis- 
posed to say at once, perish such riches ! But, though 
a nation which purchases the main part of its food 
from foreigners, is condemned to this hard alterna- 
tive, it is not so with the possessors of fertile land. 
The peculiar products of a eoumry, though never 
probably sufficient to enable it to import a large pro- 
portion of its food} as well as of its conveniences and 
luxuries, will generally be sufficient to give full spirit 
and energy to all its commercial dealings, both at 
home and abroad; while a small sacrifice of pro- 

* The Schedule D. included every species of professions. The whole amounted 
to three millions, of which the professions were considered lo be above a miihon. 

t It must always be recollected, that the national protits on land must be con- 
sidered as including rents as well as the common agricultural profits. 

\ Cottons are no! more a peculiar product of this country than silks : and woe 
will, I fear, befal us, greater than ever we have yet experienced, if the prosperity 
of our cotton trade should become necessary to purchase the food of any considera- 
ble body of our people ! 



SEC. X.] OF THE RENT OF LAND. 185 

duce, that is, the not pushing cultivation too far, 
would, with prudential habits among the poor,* 
enable it to maintain the whole of a large population 
in wealth and plenty. Prudential habits, among the 
labouring classes of a country mainly depending upon 
manufactures and commerce, might ruin it. In a 
country of fertile land, such habits would be the 
greatest of all conceivable blessings. 

Among the inestimable advantages which belong 
to that quality in the land, which enables it to yield 
a considerable rent, it is not one of the least, that in 
the progress of society it affords the main security to 
man that nearly his whole time, or the time of nearly 
the whole society, shall not be employed in procuring 
mere necessaries. - According to Mr. Ricardo, not 
only will each individual capital in the progress of 
society yield a continually diminishing revenue, but 
the whole amount of the revenue derived from profits 
will be diminished ; and there is no doubt that the 
labourer will be obliged to employ a greater quantity 
of labour to procure that portion of his wages which 
must be spent in necessaries. Both these great clas^ 
ses of society, therefore, may be expected to have 
less power of giving leisure to themselves, or of com- 
manding the labour of those who administer to the 
enjoyments of society, as contradistinguished from 
those who administer to its necessary wants. But, 
fortunately for mankind, the neat rents of the land, 
under a system of private property, can never be di- 
minished by the progress of cultivation. Whatever 
proportion they may bear to the whole produce, the 
actual amount must always go on increasing, and 
will always afford a fund for the enjoyments and lei- 

* Under similar circumstances, with respect to capital, skill, &c, it is obvious 
lhat land of the same degree of barrenness could not be cultivated, if by the preva- 
lence of prudential habits the labourers weie well paid ; but to forego the small 
increase of produce and population arising from the cultivation of ^uch land, 
would, in a large and fertile territory, be a slight and imperceptible sacrifice, while 
the happiness which would result from it to the great mass of the population, 
would be beyond all price. 

24 



186 Ofr THE RENT OF LAND. [cH. III. 

sure of the society, sufficient to leaven and animate 
the whole mass. 

If the only condition on which we could obtain 
lands yielding rent were, that they should remain 
with the immediate descendants of the first posses- 
sors, though the benefits to be derived from the pre- 
sent would no doubt be very greatly diminished, yet 
from its general and unavoidable effects on society, 
it would be most unwise to refuse it as of little or no 
value. But, happily, the benefit is attached to the 
soil, not to any particular proprietors. Rents are the 
reward of present valour and wisdom, as well as of 
past strength and cunning. Every day lands are 
purchased with the fruits of industry and talents.* 
They afford the great prize, the " otium cum digni- 
tate" to every species of laudable exertion ; and, in 
the progress of society, there is every reason to be- 
lieve, that, as they become more valuable from the 
increase of capital and population, and the improve- 
ments in agriculture, the benefits which they yield 
may be divided among a much greater number of 
persons. 

In every point of view, then, in which the subject 
can be considered, that quality of land which, by the 
laws of our being, must terminate in rent, appears to 
be a boon most important to the happiness of man- 
kind ; and I am persuaded, that its value can only be 
underrated by those who still labour under some mis- 
take, as to its nature, and its effects on society. 

* Mr. Ricardo himself is an instance of what I am statin?. He is now become, 
by his talents and industry, a considerable landholder ; and a more honourable and 
excellent man, a man who for the qualities of his head and heart more entirely de- 
serves what he has earned, or employs it better, I could not point out in the whole 
circle of landholders. 

It is somewhat siugular that Mr. Ricardo, a considerable receiver of rents, should 
have so much underrated their national importance ; while I, who never received, 
nor expect to receive any, shall probably be accused of overrating their importance. 
Our different situations and opinions may serve at least to shew our mutual sincerity, 
and afford a strong presumption, that to whatever bias our minds may have been 
subjected in the doctrines we have laid down, it has not been that, against which 
perbaps it is most difficult to guard, the insensible bias of situation and interest- 



( 187 ) 



CHAPTER IV. 



OF THE WAGES OF LABOUR. 



SECTION I. 



Of the Dependance of Wages of Labour upon Supply and 

Demand. 



The wages of labour are the remuneration to the la- 
bourer for his personal exertions. 

They may be divided, like the prices of commodi- 
ties, into real and nominal. 

The real wages of labour consist of their value, 
estimated in the necessaries, conveniences, and luxu- 
ries of life. 

The nominal wages of labour consist in their value, 
estimated in money. 

As the value of labour, as well as of commodities, 
is most frequently compared with money, it will be 
advisable in general to adopt this mode of compari- 
son, with a frequent reference, however, where it is 
necessary, to the money's worth, or the real wages of 
labour. 

The money wages of labour are determined by the 
demand and supply of money, compared with the de- 
mand and supply of labour : and, during periods when 
money may be supposed to maintain nearly the same 
value, the variations in the wages of labour, may be 
said to be regulated by the variations in the demand 
compared with the supply of labour. 



188 OF THE WAGES OF LABOUR. fcH. IV. 

The principle of demand and supply is the para- 
mount regulator of the prices of labour as well as of 
commodities, not only temporarily but permanently ; 
and the costs of production affect these prices only as 
they are the necessary condition of the permanent 
supply of labour, or of commodities. 

It is as the condition of the supply, that the prices 
of the necessaries of life have so important an influ- 
ence on the price of labour. A certain portion of these 
necessaries is required to enable the labourer to main- 
tain a stationary population, a greater portion to main- 
tain an increasing one ; and consequently, whatever 
may be the prices of the necessaries of life, the mo- 
ney wages of the labourer must be such as to enable 
him to purchase these portions, or the supply cannot 
possibly take place in the quantity required. 

To shew that what may be called the cost of pro- 
ducing labour only influences wages as it regulates 
the supply of labour, it is sufficient to turn our atten- 
tion to those cases, where, under temporary circum- 
stances, the cost of production does not regulate the 
supply ; and here we shall always find that this cost 
immediately ceases to regulate prices. 

When, from a course of abundant seasons, or any 
cause which does not impair the capitals of the far- 
mers, the price of corn falls for some time together, 
the cost of producing labour may be said to be di- 
minished, but it is not found that the wages of labour 
fall ;* and for this obvious reason, that the reduced 
cost of production cannot, under sixteen or eighteen 
years, materially influence the supply of labour in the 
market. On the other hand, when the prices of corn 
rise from a succession of indifferent seasons, or any 
cause which leaves the demand for labour nearly the 
same as before, wages will not rise : because the same 
number of labourers remain in the market ; and though 

* The fall in the price of labour which took place in 1315 and 1816 was occasioned 
solely by the diminution of demand, arising from the losses of the farmers, and in no 
respect by the diminished cost of production. 



SEC. I.] OF THE WAGES OF LABOUR. 189 

the price of production has risen, the supply is not for 
some time affected by it. So entirely, indeed, does 
tne effect of the cost of production on price depend 
upon the manner in which it regulates supply, that if 
in this, or any other country during the last twenty 
years, the production of labour had cost absolutely 
nothing, but had still been supplied in exactly the 
same proportion to the demand, the wages of labour 
would have been in no respect different. Of the truth 
of this position, we may be quite assured, by the in- 
stance alluded to in a former chapter, of a paper cur- 
rency so limited in quantity as not to exceed the me- 
tallic money, which would otherwise have circulated, 
in which case, though the cost of the paper is com- 
paratively nothing, yet, as it performs the same func- 
tion, and is supplied only in the same quantity as the 
mon <jy> it acquires the same value in exchange. 

Adam Smith is practically quite correct, when he 
says, that, " the money price of labour is necessarily 
regulated by two circumstances ; the demand for la- 

I vr „l he R rice of the pessaries and convenien- 
ces of life."* But it is of great importance to a tho- 
rough understanding of the subject, to keep constant- 
ly under our view the precise mode in which the costs 
of production operate on the price of labour, and to see 
clearly and distinctly the constant and predominant 
action of the principle of supply and demand. 

In all those cases which Adam Smith has so happi- 
ly explained and illustrated, where an apparent ir- 
regularity takes place in the pay of different kinds of 
labour, it will be found, universally, that the causes to 
which he justly attributes them, are causes of a nature 
to influence the supply of labour in the particular de- 
partments in question. The five principal circum- 
stances, which, according to him, make up for a small 
pecuniary gam in some employments, and counter- 
balance a great one in others, namely ; 1. The aeree- 
ablenessor disagreeableness of the employments them- 

* Wealth of Natioos, Book, i. ch. via. p. 130. 6th edit. 



190 OF. THE WAGES OF LABOUR. [CH* IV. 

selves. 2. The easiness and cheapness^ or the diffi- 
culty and expense of learning them. 3. The con- 
stancy or inconstancy of employment in them ; 4. the 
smalf or great trust which must be reposed in those 
who exercise them ; and 5. the probability or impro- 
bability of success in them,* are all obviously of this 
description ; and in many of the instances, it would 
not be easy to acccount for their effects on the price 
of the different kinds of labour, upon any other princi- 
ple. One hardly sees, for instance, why the cost of 
producing a poacher should be less than that of a com- 
mon labourer, or the cost of producing a coal-heaver 
much greater ; yet they are paid very differently. It 
is not easier to resolve the effects on wages of the 
small or great trust which must be reposed in a work- 
man, or, the probability or improbability of success 
in his trade, into the quantity of labour which has 
been employed to bring him into the market. Adam 
Smith satisfactorily shews, that the whole body of 
lawyers is not remunerated sufficiently to pay the ex- 
penses which the education of the whole body has 
cost ;t and it is obvious that particular skill, both in 
trades and professions, is paid high, with but little re- 
ference to the labour employed in acquiring it, which, 
owing to superior talent, is often less than that which 
is frequently applied to the acquisition of inferior pro- 
ficiency. But all these cases are accounted for in the 
easiest and most natural manner, upon the principle 
of supply and demand. Superior artists are paid high 
on account of the scanty supply of such skill, whether 
occasioned bv unusual labour or uncommon genius, or 
both. Lawyers as a body, are not well remunerated, 
because the prevalence of other motives besides 
mere gain, crowds the profession with candidates, and 
the supply is not regulated by the cost of the educa- 
tion ; and in all those instances, where disadvantages 

• Wealth of Nations, B. i. cb. x. part i. p. 152. 6th edit. 

f Id. p. 161. 



SEC. I.] OF THE WAGES OF LABOUR. l9l 

or difficulties of any kind accompany particular em- 
ployments, it is obvious that they must be paid com- 
paratively high, because if the additional remunera- 
tion were not sufficient to balance such disadvantages 
the supply of labour in these departments would be 
deficient, as, ceteris paribus, every person would 
choose to engage in the most agreeable, the least dif- 
ficult, and the least uncertain occupations. The de- 
ficiency so occasioned, whenever it occurs, will na- 
turally raise the price of labour ; and the advance of 
price, after some little oscillation, will rest at the 
point where it is just sufficient to effect the supplv re- 
quired. l * J 

Adam Smith has in general referred to the princi- 
ple of supply and demand in cases of this kind, but 
he has occasionally forgotten it :— « If one species 
of labour, he says, « requires an uncommon degree 
of dexterity and ingenuity, the esteem which men 
have for such talents will give a value to their pro- 
duce, superior to what would be due to the time 
employed about it."* And in another place, speaking 
of China, he remarks, « That if in such a country 
(that is, a country with stationary resources,) wages 
had ever been more than sufficient to maintain the la- 
bourer, and enable him to bring up a family • the 
competition of the labourers and the interest of the 
masters, would soon reduce them to the lowest rate 
which is consistent with common humanity "+ The 
reader will be aware, from what has been already 
said, that in the first case here noticed, it is not the 
esteem for the dexterity and ingenuity referred to, 
which raises the price of the commodity, but their 
scarcity, arid the consequent scarcity of the articles 
produced by them, compared with the demand. 
And in the latter case, it is not common humanity 
which interferes to prevent the price of labour from 

• Wealth of Nations, Book I. ch. ri. p. 71. 6th edit, 
f Wealth of Nations, Book I. ch. vii. p. 108. 6th edit. 



192 OF THE WAGES OF LABOUR. [CH. IV 

falling still lower. If humanity could have success- 
fully interfered, it ought to have interfered long be- 
fore, and prevented any premature mortality irom 
bding occasioned by bad or insufficient food. But 
unfortunately, common humanity cannot alter the 
resources of a country. While these are stationary, 
and the habits of the lower classes prompt them to 
supply a stationary population cheaply, the wages ot 
labour will be scanty ; but still they cannot fall below 
what is necessary, under the actual habits of the 
people, to keep up a stationary population ; because, 
by the supposition, the resources of the country are 
stationary, not increasing or declining, and conse- 
quently the principle of demand and supply wou d 
always interfere to prevent such wages as would 
either occasion an increase or diminution of people. 



SECTION II. 

Of the Causes which principally affect the Habits of the La- 
bouring Classes* 

Mr. Ricardq has defined the natural price of labour 
to be " that price which is necessary to enable the 
labourers one with another to subsist, and to perpetu- 
ate their race, without either increase or diminu- 
tion "* This price I should really be disposed to 
call a most unnatural price; because in a natural 
state of things, that is, without great impediments 
to the progress of wealth and population, such a price 
could not generally occur for hundreds of years. 
But if this price be really rare, and, in an ordinary 
state of things, at so great a distance in point of time, 
it must evidently lead to great errors to consider _ the 
market-prices of labour as only temporary deviations 

* Polit. Ecod. c. v. p. 85. 2d edit. 



SEC. II.] OF THE WAGES OF LABOUR. 193 

above and below that fixed price to which they will 
very soon return. 

The natural or necessary price of labour in any coun- 
try I should define to be, "that price which, in the ac- 
tual circumstances of the society, is necessary to oc- 
casion an average supply of labourers, sufficient to 
meet the average demand." And the market price 
I should define to be, the actual price in the market, 
which from temporary causes is sometimes above, 
and sometimes below, what is necessary to supply 
this average demand. 

The condition of the labouring classes of society 
must evidently depend, partly upon the rate at which 
the resources of the country and the demand for la- 
bour are increasing ; and partly, on the habits of 
the people m respect to their food, clothing and 
lodging. 

If the habits of the people were to remain fixed, 
the power of marrying early, and of supporting a 
large family, would depend upon the rate at which 
the resources of the country and the demand for la- 
bour were increasing. And if the resources of the 
country were to remain fixed, the comforts of the 
lower classes of society would depend upon their 
habits, or the amount of those necessaries and con- 
veniences, without which they would not consent to 
keep up their numbers. 

It rarely happens, however, that either of them re- 
main fixed for any great length of time together. 
Ihe rate at which the resources of a country increase 
is, we well know, liable, under varying circumstan- 
ces, to great variation ; and the habits of a people 
though not so liable, or so necessarily subject to 
change, can scarcely ever be considered as perma- 
nent - I« general, their tendency is to change to- 
gether. When the resources of a country are rapidly 
increasing, and the labourer commands a large por- 
tion of necessaries, it is to be expected that if he 
has the opportunity of exchanging his superfluous 

25 



194 OF THE WAGES OF LABOUR. [CH. IV. 

food for conveniences and comforts, he will acquire 
a taste for these conveniences, and his habits will be 
formed accordingly. On the other hand, it generally 
happens that, when the resources of a country be- 
come nearly stationary, such habits, if they ever have 
existed, are found to give way ; and, before the popu- 
lation comes to a stop, the standard of comfort is es- 
sentially lowered. p 

Still, however, partly from physical, and partly 
from moral causes, the standard of comfort differs es- 
sentially in different countries, under the same rate 
of increase in their resources. Adam Smith, in 
speaking of the inferior food of the people of Scot- 
land, compared with their neighbours of the same 
rank in England, observes, " This difference in the 
mode of their subsistence is not the cause, but the ef- 
fect, of the difference in their wages, though, by a 
strange misapprehension, I have frequently heard it 
represented as the cause."* It must be allowed, 
however, that this correction of a common opinion is 
only .partially just. The effect, in this case asm 
many others, certainly becomes in its turn a cause ; 
and there is no doubt, that if the continuance of low 
wages for some time, should produce among the la- 
bourers of any country habits of marrying with the 
prospect only of a mere subsistence, such habits, by 
supplying the quantity of labour required at a low 
rate, would become a constantly operating cause of 

low wages. . 

It would be very desirable to ascertain what are 
the principal causes which determine the different 
modes of subsistence among the lower classes of 
people of different countries ; but the question involves 
so many considerations, that a satisfactory solution of 
it is hardly to be expected. Much must certainly de- 
pend upon the physical causes of climate and soil ; 
but still more perhaps on moral causes, the formation 

* Book I. chap viii. p. 114. 6th edit. 



SEC. II.] OF THE WAGES OF LABOUR. 195 

and action of which are owing to a variety of cir- 
cumstances. 

From high wages, or the power of commanding a 
large portion of the necessaries of life, two very dif- 
ferent results may follow ; one, that of a rapid in^ 
crease of population, in which case the high wages 
are chiefly spent in the maintenance of large and fre- 
quent families : and the other, that of a decided im- 
provement in the modes of subsistence, and the con- 
veniences and comforts enjoyed, without a propor- 
tionate acceleration in the rate of increase. 

In looking to these different results, the causes of 
them will evidently appear to be the different habits 
existing among the people of different countries, and 
at different times. In an inquiry into the causes of 
these different habits, we shall generally be able to 
trace those which produce the first result to all the 
circumstances which contribute to depress the lower 
classes of the people, which make them unable or un- 
willing to reason from the past to the future and 
ready to acquiesce, for the sake of present gratifica- 
tion, in a very low standard of comfort and respecta- 
bility ; and those which produce the second result, to 
all the circumstances which tend to elevate the cha- 
racter of the lower classes of society, which make 
them approach the nearest to beings who " look be- 
fore and after," and who consequently cannot ac- 
quiesce patiently in the thought of depriving them- 
selves and their children of the means of being re-r 
spectable, virtuous and happy. 

Among the circumstances which contribute to the 
character first described, the most efficient will be 
found to be despotism, oppression, and ignorance : 
among those which contribute to the latter character, 
civil and political liberty, and education. 

Of all the causes which tend to generate prudential 
habits among the lower classes of society, the most 
essential is unquestionably civil liberty. No people 
can be much accustomed to form plans for the future, 






196 OF THE WAGES OF LABOUR. [CH. IV. 

who do not feel assured that their industrious exer- 
tions, while fair and honourable, will be allowed to 
have free scope ; and that the property which they 
either possess, or may acquire, will be secured to 
them by a known code of just laws impartially ad- 
ministered. But it has been found by experience, 
that civil liberty cannot be permanently secured with- 
out political liberty. Consequently, political liberty 
becomes almost equally essential ; and in addition to 
its being necessary in this point of view, its obvious 
tendency to teach the lower classes of society to re- 
spect themselves, by obliging the higher classes to re- 
spect them, must contribute greatly to aid all the 
good effects of civil liberty. 

With regard to education, it might certainly be 
made general under a bad form of government, and 
might be very deficient under one in other respects 
good : but it must be allowed, that the chances, both 
with regard to its quality and its prevalence, are 
greatly in favour of the latter. Education alone 
could do little against insecurity of property ; but it 
would powerfully assist all the favourable conse- 
quences to be expected from civil and political liber- 
ty, which could not indeed be considered as complete 

without it. 

According as the habits of the people had been de- 
termined by such unfavourable or favourable circum- 
stances, high wages, or a rapid increase of the funds 
for the maintenance of labour, would be attended 
with the first or second results before described ; or 
at least by results which would approach to the one 
or the other, according to the proportions in which 
all the causes which influence habits of improvidence 
or prudence had been efficient. 

Ireland, during the course of the last century, may 
be produced perhaps as the most marked instance of 
the first result. On the introduction of the potatoe 
into that country, the lower classes of society were 
in such a state of oppression and ignorance, were so 



SEC. II.] OF THE WAGES OF LABOUR. 



197 



little respected by others, and had consequently so 
little respect for themselves, that as long as they could 
get food, and that of the cheapest kind, they were con- 
tent to marry under the prospect of every other priva- 
tion. The abundant funds for the support of labour, 
occasioned by the cultivation of the potatoe in a 
favourable soil, which often gave the labourer the 
command of a quantity of subsistence quite unusual 
in the other parts of Europe, were spent almost exclu- 
sively in the maintenance of large and frequent families ; 
and the result was, a most rapid increase of population, 
with little or no melioration in the general condition 
and modes of subsistence of the labouring poor. 

An instance somewhat approaching to the second 
may be found in England, in the first half of the last 
century. It is well known, that during this period the 
price of corn fell considerably, while the wages of la- 
bour are stated to have risen. During the last forty 
years of the 17th century, and the first twenty of the 
18th, the average price of corn was such as, compared 
with the wages of labour, would enable the labourer 
to purchase, with a day's earnings, two-thirds of a 
peck of wheat. From 1720 to 1750 the price of 
wheat had so fallen, while wages had risen, that in- 
stead of two thirds, the labourer could purchase the 
whole of a peck of wheat, with a day's labour.* 

This great increase of command over the necessaries 
of life did not, however, produce a proportionate in- 
crease of population. It found the people of this 
country living under an excellent government, and en- 
joying all the advantages of civil and political liberty 
in an unusual degree. The lower classes of people 
had been in the habit of being respected, both by the 
laws and the higher orders of their fellow citizens, 
and had learned in consequence to respect themselves. 
And the result was, that, instead of an increase of po- 
pulation exclusively, a considerable portion of their 

• See Sect. IV. of this chapter. 



198 OF THE WAGES OF LABOUR. [CH. IV. 

increased real wages was expended in a marked im- 
provement of the quality of the food consumed, and a 
decided elevation in the standard of their comforts and 
conveniences. 

During the same period, the resources of Scotland 
do not appear to have increased so fast as those of 
England ; but since the middle of the century, the 
former country has perhaps made a more rapid pro- 
gress than the latter ; and the consequence has been, 
that, from the same causes, these increased resources 
have not produced, exclusively, increase of population, 
but a great alteration for the better in the food, dress, 
and houses of the lower classes of society. 

The general change from bread of a very inferior 
quality to the best wheaten bread, seems to have been 
peculiar to the southern and midland counties of Eng- 
land, and may perhaps have been aided by adventi- 
tious circumstances. 

The state of the foreign markets as opened by the 
bounty, together with the improving cultivation of the 
country, appears to have diminished, in some districts, 
the usual difference in the prices of the different kinds 
of grain. Though barley was largely grown and 
largely exported, it did not fall in price so muclr as 
wheat. On an average of the twenty years ending 
with 1705, compared with an average of twenty years 
ending with 1745, the quarter of wheat fell from 1/. 
165. 3d. to U 9s. lOd. but malt during the same 
period remained at the same price, or, if any thing, 
rather rose ;* and as barley is supposed to be not a 
cheaper food than wheat, unless it can be purchased 
at § of the price,t such a relative difference would have 
a strong tendency to promote the change. 

From the small quantity of rye exported, compared 
with wheat and barley, it may be inferred that it did 
not find a ready vent in foreign markets ; and this 

* Eden's State of the Poor. Table, Vol. III. p. 79. In this table, a deduction is 
made of 2-9ths for the quarter of middling wheat of eight bushels, which is too much. 
+ Tracts on the Corn Trade, Supp. p. 199 



SEC. II.] OF THE WAGES OF LABOUR. 



199 



circumstance, together with the improving state of the 
land, diminished its cultivation and use. 

With regard to oats, the prohibitory laws and the 
bounty were not so favourable to them as to the other 
grains, and more were imported than exported. This 
would naturally tend to check their cultivation in the 
districts which were capable of growing the sort of 
grain most certain of a market ; while the Act of 
Charles II. respecting the buying up of corn to sell 
again, threw greater obstacles in the way of the dis- 
tribution of oats than of any other grain. 

By this Act, wheat might be bought up and stored 
for future sale when the price did not exceed 485. ; 
barley, when the price did not exceed 28s. ; and oats, 
when the price did not exceed 135. 4rf. The limited 
rates of wheat and barley were considerably above 
their ordinary and average rates at that period, and 
therefore did not often interfere with their proper 
distribution ; but the ordinary price of oats was sup- 
posed to be about 125. the quarter, and consequently 
the limit of 135. 4>d. would be very frequently exceed- 
ed,* and obstacles would be continually thrown in 
the way of their transport from the districts of their 
growth to the districts where they might be wanted. 
But if, from the causes here described, the labouring 
classes of the South of England were partly induced, 
and partly obliged, to adopt wheat as their main food, 
instead of the cheaper kinds of grain, the rise of 
wages would at once be accounted for, consistently 
with the fall in the price of wheat ; an event which, 
under an apparently slack demand for labour at the 
time, has been considered as so improbable by some 
writers, that the accuracy of the accounts has been 
doubted. It is evidently, however, possible, either on 
supposition of a voluntary determination on the part 
of the labouring classes to adopt a superior description 
of food, or a sort of obligation to do it, on account of 

* Tracts on the Cora Trade, p. 5t. 



200 OF THE WAGES OF LABOUR. fCH. IV. 

the introduction of a new system of cultivation adapt- 
ed to a more improved soil : and, in either case, the 
effects observable from 1720 to 1750 would appear : 
namely, an increased power of commanding the 
necessaries of life, without a proportionate increase of 
population. It is probable that both causes contribut- 
ed their share to the change in question When once 
the fashion of eating wheaten bread had become gen- 
eral in some countries, it would be likely to spread 
into others, even at the expense of comforts of a dif- 
ferent description ; and in all cases where particular 
modes of subsistence, from whatever causes arising, 
have been for any time established, though such 
modes always remain susceptible of change,the change 
must be a work of time and difficulty. A country,which 
for many years had principally supported its peasantry 
on one sort of grain, must alter its whole system of ag- 
riculture before it can produce another sort in suffi- 
cient abundance ; and the obstinacy with which habits 
are adhered to by all classes of people, as in some 
countries it would prevent high wages from improv- 
ing the quality of the food, so in others it would pre- 
vent low wages from suddenly deteriorating it ; 
and such high or low wages would be felt almost ex- 
clusively in the great stimulus or the great check 
which they would give to population. 



SECTION HI. 

Of the Causes which principally influence the Demand for 
LaboWy and the Increase of the Population. 

There is another cause, besides a change in the ha- 
bits of the people, which prevents the population of a 
country from keeping pace which the apparent com- 
mand of the labourer over the means of subsistence. 



SttC. III.] OF THE WAGES OF LABOUR. 201 

It sometimes happens that wages are for a time rath- 
er higher than they ought to be, in proportion to the 
demand for labour. This is the most likely to take 
place when the price of raw produce has fallen in 
value, so as to diminish the power of the cultivators 
to employ the same or an increasing number of la- 
bourers at the same price. If the fall be considera- 
ble, and not made up in value by increase of quanti- 
ty, so many labourers will be thrown out of work 
that wages, after a period of great distress, will gene- 
rally be lowered in proportion. But if the fall be 
gradual, and partly made up in exchangeable value 
by increase of quantity, the money wages of labour 
will not necessarily sink ; and the result will be mere- 
ly a slack demand for labour, not sufficient perhaps 
to throw the actual labourers out of work, but such 
as to prevent or diminish task- work, to check the em- 
ployment of women and children, and to give but lit- 
tle encouragement to the rising generation of labour- 
ers. In this case the quantity of the necessaries of 
life actually earned by the labourer and his family, 
may be really less than when, owing to a rise of 
prices, the daily pay of the labourer will command a 
smaller quantity of corn. The command of the la- 
bouring classes over the necessaries of life, though 
apparently greater, is really less in the former than 
in the latter case, and, upon all general principles, 
ought to produce less effect on the increase of popula- 
tion. 

This disagreement between apparent wages and 
the progress of population will be further aggravated 
in those countries where poor laws are established, 
and it has become customary to pay a portion of the 
labourers' wages out of the parish rates. If, when 
corn rises, the farmers and landholders of a parish 
keep the wages of labour down, and make a regular 
allowance for children, it is obvious that there is no 
longer any necessary connexion between the apparent 
wages of day labour and the real means which the 

26 



OF THE WAGES OF LABOUK. [CH. IV*. 

labouring classes possess of maintaining a family. 
When once the people are reconciled to such a system, 
the progress of population might be very rapid, at a 
time when the wages of labour, independently of 
parish assistance, were only sufficient to support a 
wife and one child, or even a single man without 
either wife or child, because there might still be both 
encouragement to marriage, and the means of sup- 
porting children.* 

When the population of a country increases faster 
than usual, the labouring classes must have the com- 
mand of a greater quantity of food than they had be- 
fore possessed, or at least applied to the maintenance of 
their families. This may be obtained in various 
ways— by higher real wages, by saving in conveni- 
ences, by adopting a cheaper kind of food, by more 
task-work and the more general employment of the 
women and children, or by parish allowances. But 
the actual application of the greater quantity of food 
is, I conceive, necessary to the increase of population ; 
and wherever such increase has taken place, some of 
these causes, by which a greater quantity of food is 
procured, will always be in action, and may generally 
be traced. 

The high wages, both real and nominal of Ame- 
rica, occasioned by the rapid accumulation of capital, 
and the power of selling produce, obtained by a com- 
parative ^small quantity of labour, at European prices, 
are unquestionably the cause of the very rapid pro- 
gress of the American population. 

The peculiar increase of the population of Ireland, 
compared with other European countries, has obvi- 
ously been owing to the adoption of a cheaper food, 

* It is most fortunate for the country and the labouring classes of society, that 
the bill which passed the House of Commons last session, for taking from their pa- 
rents the children of those who asked for relief, and supporting them on public 
funds, did not pass the House of Lords. Such a law would nave been the commence- 
ment of a new system of poor laws beyond nil comparison worse than the old ■ and 
it is difficult to conceivp how it could have been recommended by persons who 
agreed to publish the opinions which appear in the greater part of the Report on the 
Poor Law?, 



SEC. III.] OF THE WAGES OF LABOUR. 203 

which might be produced in large quantities, and 
which, aided by the Cottar system of cultivation, 
has allowed the increase of people to precede the de- 
mand for labour. 

And the great increase of population of late years 
in England and Scotland has been owing to the 
power of the labouring classes to obtain a greater 
quantity of food, partly by temporary high wages in 
manufactures, partly by the increased use of pota- 
toes, partly by increased task-work and the increased 
employment of women and children, partly by in- 
creased parish allowances to families, and partly per- 
haps, (though I think but little taking the country 
throughout) by a saving in conveniences and luxu- 
ries. 

In general, perhaps, more of these causes will be 
called into action by a rise of prices, which sometimes 
lowers the command of a day's labour over the ne- 
cessaries of life, than by a fall of prices which some- 
times raises it. 

What is mainly necessary to a rapid increase of 
population, is a great and continued demand for la- 
bour; and this is occasioned by, and proportioned 
to, the rate at which the whole value of the capital 
and revenue of the country increases annually ; be- 
cause, the faster the value of the annual produce in- 
creases, the greater will be the power of purchasing 
fresh labour, and the more will be wanted every 
year. 

It has been sometimes thought, that the demand 
for labour can only be in proportion to the increase 
of the circulating, not the fixed capital ; and this is 
no doubt true in individual cases :* but it is not ne- 
cessary to make the distinction in reference to a whole 
nation ; because where the substitution of fixed capi- 
tal saves a great quantity of labour, which cannot 
be employed elsewhere, it diminishes the value of 

• See an ingenious pamphlet on the condition of the labouring classes by Mr. 
carton. 



204 OF THE WAGES OF LABOUR. [CH. IV* 

the annual produce, and retards the increase of the 
capital and revenue taken together 

If, for instance, a capitalist who had employed 
£20,000 in productive labour, and had been in the 
habit of selling his goods for £22,000, making a 
profit of 10 per cent., were to employ the same quan- 
tity of labour in the construction of a machine worth 
£20,000, which would enable him to carry on his 
business without labour in future, except as his ma- 
chine might require repair, it is obvious that, during 
the first year, the same value of the annual produce 
and the same demand for labour would exist ; but in 
the next year, as it would only be necessary for the 
capitalist, in order to obtain the same rate of profits 
as before, to sell his goods for a little more than 
£2,000 instead of £22,000, the value of the annual 
produce would fall, the capital would not be increas- 
ed, and the revenue would be decidedly diminished ; 
and upon the principle that the demand for labour 
depends upon the rate at which the value of the gene- 
ral produce, or of the capital and revenue taken to- 
gether, increases, the slackness of the demand for 
labour under such circumstances would be adequate- 
ly accounted for. 

In general, however, the use of fixed capital is 
extremely favourable to the abundance of circulating 
capital ; and if the market for the products can be 
proportionally extended, the whole value of the capi- 
tal and revenue of a state is greatly increased by it, 
and a great demand for labour created. 

The increase in the whole value of cotton pro- 
ducts, since the introduction of the improved ma- 
chinery, is known to be prodigious ; and it cannot 
for a moment be doubted that the demand for labour 
in the cotton business has very greatly increased 
during the last forty years. This is indeed sufficient- 
ly proved by the greatly increased population of Man- 
chester, Glasgo v, and the other towns where the 
cotton manufactures have most flourished. 



SEC. III.] OF THE WAGES OF LABOUR. 205 

A similar increase of value, though not to the 
same extent, has taken place in our hardware, wool- 
len, and other manufactures, and has been accom- 
panied by an increasing demand for labour, notwith- 
standing the increasing use of fixed capital. 

Even in our agriculture, if the fixed capital of 
horses, which, from the quantity of produce they 
consume, is the most disadvantageous description of 
fixed capital, were disused, it is probable, that a 
great part of the land which now bears corn would 
be thrown out of cultivation. Land of a poor quali- 
ty would never yield sufficient to pay tlie labour of 
cultivating with the spade, of bringing manure to 
distant fields in barrows, and of carrying the pro- 
ducts of the earth to distant markets by the same 
sort of conveyance. Under these circumstances, as 
there would be a great diminution in the quantity of 
corn produced, there would be a great diminution 
in the whole value of the produce ; and the demand 
for labour and the amount of the population would 
be greatly diminished.* 

On the other hand, if, by the gradual introduction 
of a greater quantity of fixed capital, we could cul- 
tivate and dress our soil and carry the produce to 
market at a much less expense, we might increase 
our produce very greatly by the cultivation and im- 
provement of all our waste lands ; and if the sub- 
stitution of this fixed capital were to take place in 
the only way in which we can suppose it practically 
to take place, that is, gradually, there is no reason 
to doubt that the value of raw produce would keep 

* It has lately been stated, that spade cultivation will yield both a greater gros» 
produce and a greater neat produce. I am always ready to bow to well established 
experience ; but if such experience applies in the present case, one cannot suffi- 
ciently wonder at the continued use of ploughs and horses in agriculture. Even 
supposiug however that the use of the spade might, on some soils, so imp ove the 
land, as to make the crop more than pay the additional expense of the labour, taken 
separately ; yet, as horses must b* kept to carry out dressing to a distance and to 
convey the produce of the soil to market, it could hardly answer to thecu'tivator 
to employ men in digging his fields, while his horses were standing idle in his stabies. 
As far as experience has yet gone, I should certainly say, that it is commerce, price 
and skill, which will cultivate the wastes of large and poor territories — not the 
spade. 



206 GF THE WAGES OF LABOTJft. [CH. IV. 

up nearly to its former level ; and its greatly increas- 
ed quantity, combined with the greater proportion of 
the people which might be employed in manufactures 
and commerce, would unquestionably occasion a very 
great increase in the exchangeable value of the gene- 
ral produce, and thus cause a great demand for labour 
and a great addition to the population. 

In general, therefore, there is little to fear that 
the introduction of fixed capital, as it is likely to take 
place in practice, will diminish the effective demand 
for labour ; indeed it is to this source that we are to 
look for the main cause of its future increase. At the 
same time, it is certainly true, as will be more fully 
stated in a subsequent part of this volume, that if the 
substitution of fixed capital were to take place very 
rapidly, and before an adequate market could be found 
for the more abundant supplies derived from it and for 
the new products of the labour that had been thrown 
out of employment, a slack demand for labour and 
great distress among the labouring classes of society 
would be universally felt. But in this case, the gene- 
ral produce, or the capital and revenue of the coun- 
try taken together, would certainly fall in value, owing 
to a temporary excess of supply compared with the 
demand, and would shew that the variations in this 
value, compared with the previous value paid in 
wages, are the main regulators of the power and will to 
employ labour. 

[n the formation of the value of the whole produce 
of a country, a part depends upon price, and a part 
upon quantity. That part which depends merely 
upon price is in its nature less durable and less effec- 
tive than that which depends upon quantity. An 
increase of price, with little or no increase of quantity, 
must.be followed very soon by a nearly proportionate 
increase of wages ; while the command of these in- 
creased money wages over the necessaries of life going 
on diminishing, the population must come to a stop, 
and no further rise of prices can occasion an effective 
demand for labour. 



SEC. IV.] OF THE WAGES OF LABOUR. 207 

On the other hand, if the quantity of produce be 
increased so fast that the value of the whole diminishes 
from excessive supply, it may not command so 
much labour this year as it did in the last, and for a 
time there will be no demand for workmen. 

These are the two extremes, one arising from 
increased value without increased quantity ; and the 
other from increased quantity without increased value. 

It is obvious that the object which it is most desirable 
to attain is the union of the two. There is somewhere 
a happy medium, where, under the actual resources of 
a country, the increase of wealth and the demand for 
labour are a maximum ; but this point cannot be 
ascertained. An increase of quantity with steady 
prices, or even slightly falling, is consistent with a 
considerable increase of the general value of produce, 
and may occasion a considerable demand for labour ; 
but in the actual state of things, and in the way in 
which the precious metals are actually distributed, 
some increase of prices generally accompanies the 
most effective demand for produce and population. It 
is this increase both of quantity and price which most 
surely creates the greatest demand for labour, excites 
the greatest quantity of industry, and generally occa- 
sions the greatest increase of population. . 



SECTION IV. 

Of the Effect of a Fall in the Value of Money on the Demand 
for Labour and the Condition of the Labourer, 

Some writers of great ability have been of opinion 
that rising prices, or a falling value of money, are 
very unfavourable to the lower classes of society ; and 
certainly there are some periods of our history which 
seem strongly to countenance this opinion : but I am 



208 OF THE WAGES OF LABOUR. [CH. IV. 

inclined to think, that if these periods, and the circum- 
stances connected with them, be examined with more 
attention, the conclusion which has been drawn from 
them will not appear so certain as has been generally 
imagined. It will be found that, in the instances m 
question, other causes were in operation to which the 
effect referred to might more justly be attributed ; and 
we shall hardly have good reason to conclude, that 
where an effective demand for labour accompanies a 
fall in the value of money, and no positive obstacles 
are thrown in the way of its rising, it will not, in a 
moderately short time, follow the price of the main 
food of the labourer. 

The period of our history universally noticed is the 
16th century, from the end of the reign of Henry VII. 
to the end of the reign of Elizabeth. During this 
period it is an unquestionable fact that the real wages 
of labour fell in an extraordinary manner, and towards 
the latter end of the century they would not command 
much above one-third of the quantity of wheat which 
they did at the beginning of it. 

Sir F. M. Eden has noticed the price of wheat m 
nineteen out of the twenty-four years of Henry VII.'s 
reign, and in some of the years two or three times.* 
Reducing the several n tices in the same year first to 
an average, and then taking the average of the nine- 
teen prices, it comes to 6s. Sid.xhe quarter, rather less 
than 9£d. the bushel, and 2Jrf. the peck. 

By a statute passed in 1495, to regulate wages, the 
price of common day labour seems to have been 4d. 
or 4id. without diet. All labourers and artificers, 
not specifically mentioned, are put down at 4d. ; but 
in another part of the statute, even a woman labourer 
(I suppose in hay time) is set down at 4id. and a car- 

ter at Scl* T 

At the price of wheat just stated, if the wages of 
the labourer were M. he would be able to purchase, 

• State of the Poor, vol. iii. p. xli. t Id. vol. iii. p. lxxxix. 



I 

SEC. IV.] OF THE WAGES OF LABOUR. 209 

by a day's labour, a peck and three quarters of wheat, 
within half a farthing ; if his wages were 4£ d. he 
would be able to purchase half a bushel, within a 
farthing. 

The notices of the price of day labour in the sub- 
sequent years are extremely scanty. There are none 
in the reigns of Henry VIII., Edward, and Mary. 
The first that occurs is in 1575, and the price is men- 
tioned at 8d* Taking an average of the five pre- 
ceding years in which the prices of wheat are no- 
ticed, including 1575, having previously averaged the 
several prices in the same year, as before, it appears 
that the price of the quarter of wheat was 1/. 2s. 2d. 
which is 2s. 9hd. the bushel, and 8 id. the peck. At 
this price, a day's labour would purchase a peck of 
corn within a farthing, or if of a peck. 

This is a diminution of nearly a half in the corn 
wages of labour ; but at the end of the century, the 
diminution was still greater. 

The next notice of the price of labour, with the 
exception of the regulations of the justices in some 
of the more northern counties, which can hardly be 
taken as a fair criterion for the south, is in 1601, 
when it is mentioned as lOd. Taking an average 
from the Windsor table of five years, which includes, 
however, one excessively dear year, and subtracting 
^ to reduce it to Winchester measure, it appears that 
the price of the quarter was 21. 2s. Od. which is 5s. 
3d. the bushel, and Is. 3hd, the peck A day's la- 
bour would at this price purchase less than | of a 
peck.f 

This is unquestionably a prodigious fall in the real 
wages of labour. But it is of great importance to in- 

* State of the Poor, vol. iii. p. lx. 

+ The year 1.597 seems to have heen an extraordinary dear one, and ought not to 
be included in so short an average, if an average was taken of the five years be- 
ginning with 1598, the labourer would appear to earn about 5-7ths of a peck ; and, on 
an average of ten years, from the same period, he would earn about 4-5 ths of a peck. 
Ouring the five years from 1594 to 1598 inclusive, the price of wheat seems to have 
been unusually high from unfavourable seasons. 

27 



210 OF THE WAGES OF LABOUR. [CH. m 

quire whether the prices From which they fell are not 
as extraordinary as the prices to which they sunk ; 
and here I think we shall find that the prices the 
most difficult to be accounted for are the high prices 
of the 15th century, rather than the low prices of 
the 16th. 

If we revert to the middle of the 14th century, at 
the time when the first general statute was passed to 
regulate wages, the condition of the labourer will ap- 
pear to be very inferior to what it was during the 
greatest part of the 15th century. This fact may be 
established on unexceptionable evidence. Statutes 
or regulations to fix the price of labour, though they 
do not always succeed in their immediate object, 
(which is generally the unjust one, of preventing la- 
bour from rising,) may be considered as undeniable 
testimonies of what the prices of labour had been not 
long previous to the time of their passing. No legis- 
lature in the most ignorant age could ever be so rash 
as arbitrarily to fix the prices of labour without refe- 
rence to some past experience. Consequently, though 
the prices in such statutes cannot be depended upon 
with regard to the future, they appear to be quite 
conclusive with regard to the past. In the present 
case, indeed, it is expressly observed, that servants 
should be contented with such liveries and wages as 
they received in the 20th year of the King's reign, 
and two or three years before.* 

From this statute, which was enacted in 1350, the 
25th of the King, for the most unjust and impolitic 
purpose of preventing the price of labour from rising 
after the great pestilence, we may infer that the price 
of day labour had been about 1 hd. or 2d. Common 
agricultural labour, indeed, is not specifically men- 
tioned ; but the servants of artificers are appointed to 
take Hd., common carpenters 2d., and a reaper, the 
first week in August, also 2d., all without diet ; from 

* Eden's State of the Poor, vol. i. p. 32. 



SEC. IV.] OF THE WAGES OF LABOUR. 2X1 

which we may conclude that the wages of common 
day labour must have been as often 1 Id. as 2d* 

Sir F. M. Eden has collected notices of the prices 
of wheat in sixteen out of the twenty-five years of 
Edward III. previous to the time of the passing of 
the statute. Taking an average as before, the price 
of wheat appears to have been about 5s. 4J. the 
quarter, which is Sd. the bushel, and 2d. the peck. 

At this price of wheat, if the labourer earned 1 hd. 
a day, he could only purchase by a day's labour I of 
a peck of wheat ; if he earned 2d. he could purchase 
just a peck. In the former case, he would earn less 
than half of the corn earned by the labourer of Henry 
VII. ; and in the latter case, very little more than half. 

But in the subsequent period of Edward III.'s 
reign, the labourer appears to have been much worse 
off. The statute of labourers was renewed, and, it is 
said, enforced very rigidly, notwithstanding a consi- 
derable rise in the price of corn.f On an average of 
the thirteen years out of twenty-six, in which the 
prices of wheat are noticed, the quarter is about 11 s. 
9d. which is about Is. 5hd. the bushel, and 4id. the 
peck. 

At this price, if the wages of labour had not risen, 
the condition of the labourer would be very misera- 
ble. He would not be able to purchase so much as 
half-a-peck of wheat by a day's labour, about a 
fourth part of what he could subsequently command 
in the reign of Henry VII. It is scarcely possible, 
however, to conceive that the wages of labour should 
not have risen in some degree, notwithstanding the 
statute and its renewal ; but even if they rose one 
half, they would not have nearly kept pace with the 
price of corn, which more than doubled ; and during 
the last twenty-five years of the reign of Edward III. 
rhe earnings of the labourer in corn were probably 

* Eden's State of the Poor, vol. i. p. 33. 
\ F.den's State of the Poor, vol. i. p. 36. 42. 



212 OF THE WAGES OF LABOUR. [CH. IV' 

quite as low as during the last twenty-five years of 
Elizabeth. 

In the reigns of Richard II. and Henry IV. the 
price of wheat seems to have fallen nearly to what 
it was in the first half of the reign of Edward III. 
From 1377 to 1398 inclusive, it was about 5s. Id. 
the quarter ; and from 1399 to 1411, about 6s. Id. 
It is difficult to ascertain how much the wages of la- 
bour had advanced; but if they had risen so as to 
enable the labourer to support himself, through the 
last twenty-six years of the reign of Edward HI. and 
had not sunk again, in consequence of the subsequent 
fall, which is probable, the labourer, during these 
reigns, must have been well paid. j 

During the reign of Henry V. and the first part ot 
Henry VI. to the passing of the statutes in 1444, the 
price of the quarter of wheat was about 85. 8d.f 
This would be Is. Id. the bushel, and 3 id. the peck. 
For the greater part of these thirty-two years, the 
wages of day labour seem to have been about 3d. 
They did not probably rise to what they were ap- 
pointed to be in 1444, that is Ad. or 4id., till the ten 
dear years preceding the statute, during which, the 
average price of the quarter was 10s. 8d. On an 
average of the whole period of thirty-two years, the 
wages of day labour appear to have purchased about 
a peck of corn, rather less perhaps, than more, in 
reference to the greater portion of the period. 

From 1444 to the end of the century, the average 
money price of wheat was about 6s. while the wages 
of day labour continued at 4d. or 4id.J At the lat- 
ter of these prices of labour, wages would purchase 
exactly two pecks of wheat, or half a bushel, and at 
the former price I of half a bushel. 

* Eden's State of the Poor, vol., iii. p. xxv. et seq. 

f Id. Table of Price?, vol. iii. 

t Mr. Hallam. in his valuable Work on the Middle Ages, has overlooked i the dis- 
tinction between the reigns of Edward III. and Henry IV. with re^rf to the. ate 
of the labouring classes. The two periods appear to have been essentially different 
in this respect. 



SEC. IV.] OF THE WAGES OF LABOUR. 213 

From the passing of the first statute of labourers 
in 1350 to the end of the 15th century, a period of 
150 years, successive changes had been taking place 
in the quantity of metal contained in the same nomi- 
nal sum ; so that the pound of silver, which in the 
middle of the reign of Edward III. was coined into 
1/. 2s. 6d. was, in the reign of Henry VII., coined 
into 1/. 17s. 6d. 

One should naturally have expected, that this de- 
preciation of the coin would have shewn itself first, 
and most conspicuously, in some exportable commo- 
dity, such as corn, rather than labour; and so it 
probably would, as it did afterwards in the reign of 
Elizabeth, if wheat had not at the same time 
been cheap in the rest of Europe, particularly in 
France. In fact, however, this great fall in the in- 
trinsic value of the coin was in no respect made up 
by the slight rise of nominal price which occurred in 
the course of that period. This rise was only from 
about 5s. 4d. to 6s. or 65. 3d. Consequently a very 
considerable fall had really taken place in the bullion 
price of wheat. 

But the nominal price of labour, instead of rising 
in the same slight degree as wheat, rose from \hd. 
or 2d. to Ad. or 4id., a rise much more than sufficient 
to cover the deterioration of the coin ; so that the 
bullion price of labour rose considerably, during the 
time that the bullion price of wheat fell. It is singu- 
lar, that Adam Smith, in his Digression concerning 
the value of silver during the four last centuries, 
should not have noticed this circumstance. If he 
had been aware of this rise in the bullion price of la- 
bour, his principles, which led him to consider corn 
as a good measure of value merely because it is the 
best measure of labour, should have led him to a 
very different conclusion from that which he has 
stated. If we were to take a mean between corn 
and labour, the value of silver during these 150 
years, instead of rising to double what it was, would 
appear to have continued nearly stationary. 



214 OF THE WAGES OF LABOUK. [CH. IV. 

It was during the favourable part of this ; period 
that Sir John Fortescue wrote his work on Absolute 
and United Monarchy, and contrasted the prosper- 
ous and happy condinpn of the PJ-^J^ 
land with the miserable state of the peasantry 01 

Fr But e it is not sufficient to shew thatthe jndigl 

nf the lower classes of people m England during 
the last haTf of the 15th century, was much supenoi 
t what it wa either in the preceding century, or sub- 
sequeniy during the depreciation of money occasion- 
S S I discovery of the American mines. lo 
Ive^hat if wTpeculiar, we must compare it with 
rcondiuon'f t& people after the depreciation had 

"According to Adam Smith, the effects of : the di. 

co n 1 iter {^iTZi^Vy- 

end about 1638 or «• »? , ti in E ssex at the 
labour, as established by the justices m r,« 
CheL'sford quarter-sessions, were for he summer 
half vear, harvest excepted, Is. 2d. Ihis is a con 
SerErise in the money PJ^J^ 
time d Elizabeth ; but we shall find that it is inaioiv 
Drwortionate to the rise of the price of wheat It 
we take an average of the five years preceding 1651, 
Z&£ to wLh the regulation .won d pre AjWj 

7 , At a 9c thfueck At this price of wheat, with 
wagt at US! tretbourer wild only earn * of a 

Pfn^S^ol'afteV'The accession of Charles II., 
Jges were a°gai„ regulated by the jusUces in Es- 

. A Uhe relation passed i„ ApriUbeyear 1651 is no, iaeluded in the aver- 

* Eaeye.c^dia Brit. Supp. Artie. Corn Law, .here a tabie » give, with the 
V9tU deducted. 



SEC. IV.] OF THE WAGES OF LABOUR. 215 

sex, at the Easter Sessions, and the price of common 
day-labour during the summer half year, with the ex- 
ception of harvest time, was continued at Ud. 

Ji we take an average of the price of wheat for 
the five years preceding 1661, as before, it appears 
that the quarter was 21. 9s. 3d. This is 6s. 2d. the 
bushel and IShd. the peck. At this rate the labourer 
would earn about § of a peck. It is true that the 
averages of the prices of corn here taken refer to 
clear times ; but the wages were appointed just at 
tliese times: and in the regulations of 1651 it is ex- 
pressly stated, that they are appointed, " having a spe- 
cial regard and consideration to the prices at this time 
ot all kinds of victuals and apparel, both linen and 
woollen, and all other necessary charges wherewith 
artificers, labourers and servants have been more 
grievously charged with than in times past."* 

itfivT ?}£ an 1 avem g e of the twe «ty years from 
154b to 1665 inclusive, we shall find that the price 
ot wheat was rather above than below that of the five 
years preceding 1661. The average price of the 

?r! art ^ j{ Wb , e ? t durin § these twent } r J ears was 21. 
10*. Ojd.f which is 6s. 3d. the bushel, and nearly 

I yd. the peck. At this price, with wages at 1M. the 
Jabourer for these twenty years would hardly be able 
to earn so much as 1 of a peck. 

After 1665 the price of corn fell, but wages seem 
to have fallen at the same time. 

In 1682 wages at Bury in Suffolk were appointed 
11 ii m . summer > and 5d. in winter with diet, 
and double without. This makes the summer wages, 
Is. ; and according to the price of wheat in the pre- 
ceding five years, the labourer who earned a shilling 
a day, could hardly command so much as £ of a peck 
of wheat. 4 l 



'* Eden's State of the Poor. vol. iii. p. 88. 
t Windsor Table, deducting l-9th. 



^16 OF THE WAGES OF LABOUR. [CH. IV< 

^4«,™ S-"Irin s .Ms period » h™ ^» 

v. ,!i« the earnings of the labourer would be about 
frfapei of wheaf. But there is reason to think 
^average wages were not sc ; h ? h « J fa 

In the regulations of the justices ai J Vrt , 

A* common labourers were flowed to take on£ 
8A a day for the summer halt vew ^ & 

Shuckburgh puts down only j" ™ s £' ates the 
i C7£ in 1 720 -t and Arthur i oung esuuwic * 
vera«e P icfo labour during the whole of the IT* 

eSy It ICHAt If « these 8«-* ^JSfffi, 
timate the wages of abour from 1665 to the ena oi 
century atS- it would appear that the earn* g kJ 
the' labourer, in the 17th ^f^fX^S^ 
tion of money &£$£* re o^nly sufc^ 
purchase ! oi a pecK oi wuw , ® tl earn . 

. Bte favourable supposition of ^ a day a,t ^ ^ 
ings of the labourer, they would puicnase, as 
stated, about J of a peck. rentun . 



* Eden's State of the Poor, vol. mil- p. 104. 
f Fhilosoph. Trans, for 1798. Part i. p. 176 
$ Annals of Agriculture, No-70. p»M 

Vol. I. P 38f>. 



SEC. IV.] OF THE WAGES OF LABOUR. 217 

from various information he had collected in different 
parts of England, he had reason to think that the 
wages of labour had doubled* during the last sixty 
years, which could hardly be true, unless wages in 
the early part of the century had been lower than 
Is. 

The average price of wheat for the first twenty 
years of the century was rather less than 21. ; and if 
the wages of labour were only 10c?. or Whd., the 
labourer would earn considerably less than I of a 
peck. If the wages were Is. he would earn f of a 
peck. 

From 1 720 to 1 755 corn fell and continued low, 
while the wages of labour seem to have been about 
Is. During these thirty-five years the price of wheat 
was about 33s. the quarter, or a little above Is. the 
peck, and the labourer therefore, on an average of 
thirty-five years together, would be able to earn 
about a peck of wheat. 

From this time corn began gradually to rise, while 
wages do not appear to have risen in the same pro- 
portion. The first authentic account that we have 
of the price of labour, after corn had begun to rise, 
is in the extensive Agricultural Tours of Arthur 
Young, which took place in 1767, 1768 and 1770. 
The general result of the price of labour from these 
tours, on the mean rate of the whole year, was 7s. 
Md. a week.f Taking an average of the five years, 
from 1766 to 1770 inclusive, the price of the quarter 
of wheat was 21. 7s. 8rf. or nearly 48s. J which would 
be 6s. the bushel, and Is. 6d. the peck. At these 

* Vol. I. p. 385. 

t Annals of Agriculture, fso. 271. p. 215. 

t Deducting l-9ih from the prices in the Windsor Table. Arthur Young deducts 
another 9th for the quality; hut this is certainly too much, in reference to tl.e gen - 
SIpZhP ° ,he n kl "Sdom to which the latest tables apply. 1 have therefore pre- 
ferred adhering all along to the Windsor prices ; and the reader will make what al 
S^heay^^^^ 8 *^^' -cording to M, Rose, is noT much 

28 



218 OF THE WAGES OF LABOUR. [CH, IV 

prices of labour and wheat, the labourer would earn 
very nearly £ of a peck. 

In 1810 and 1811, accounts from thirty-seven 
counties, which, according to Arthur Young, were 
quite satisfactory, make the wages of day-labour for 
the mean rate of the year 145. 6d* a week, or nearly 
25. 6d. a day. The price of wheat for five years 
ending with 1810 was 925.— ending with 1811, was 
96s.\ The prices both of labour and wheat appear 
to have doubled ; and the labourer, in 1810 and 1811, 
could earn just about the same quantity of wheat as 
he could about forty years before, that is f of a peck. 
The intermediate periods must necessarily have been 
subject to slight variations, owing to the uncertainty 
of the seasons, and an occasional advance in the price 
of corn, not immediately followed by an increased 
price of labour ; but, in general, the average must 
have been nearly the same, and seldom probably for 
many years together differed much from | of a peck. 



SECTION V. 



On the Conclusions to be drawn from the preceding Review. 

Of the Prices of Corn and Labour during the five last 

Centuries. 

From this review of the prices of corn and labour, 
during nearly the five last centuries, we may draw 
some important inferences. 

In the first place, I think it appears that the great 
fall in the real wages of labour which took place in 
the 16th century, must have been occasioned mainly 
by the great and unusual elevation which they had 

* Annals of Agriculture, No. 271. p. 215. and 216. 

f W mdsor Table, Sup'p. to Encyclopedia Brit. Art. Corn Laws 



SEC. V.] OF THE WAGES OF LABOUR. 219 

previously attained, and not by the discovery of the 
American mines and the consequent fall in the value 
of money. When we compare the wages of labour 
during the last half of the 15th century, with what 
they were both before and subsequently, it appears 
that whatever may have been the cause of these high 
wages, they were evidently peculiar, and could not 
therefore be permanent. This indeed is evident, not 
only by comparing them with previous and subse- 
quent periods, but by considering their positive 
amount. Earnings of the value of nearly two pecks 
or half a bushel of wheat a day would allow of the 
earliest marriages, and the maintenance of the largest 
families. They are nearly the same as the earnings 
of the American labourer. In such a country as En- 
gland was, even at that time, such wages could only 
be occasioned by temporary causes. Among these 
we must reckon, a general improvement in the sys- 
tem of cultivation after the abolition of villanage, 
which increased the plenty of corn ; and the compara- 
tively rapid progress of commerce and manufactures, 
which occasioned a great demand for labour ; while, 
owing to the wars in France, the civil wars between 
the Houses of York and Lancaster, and above all per- 
haps, the slow change of habits among a people lately 
emancipated, this increase of produce and demand 
had not yet been followed by a proportionate effect 
on the population. 

Certain it is that corn was very cheap both in 
France* and England ; and labour in this country 
could not possibly have risen and kept high for so 

* It is a very curious fact, that the bullion price of corn continued unusually low 
in France from 1444 to 1510. (Garnier\i Richesse des Nations, vol. ii. p. 184.) just 
during the same period that it was low in England. Adam Smith is inclined to at- 
tribute this fall and low price to a deficiency in the supply of the mines, compared 
with the demand; (B. i. ch. xi.) but this solution in no respect accounts for the ri6e 
of the bullion price of labour in England, at the time that the bullion price of corn 
was falling. .Nothing can account for this fact, but a relative plenty of corn com- 
pared with labour— a state of things which has little to do with the mines. The 
low prices in France were probably connected with the abolition of villanage, and 
an extended cultivation iu the reign of Charles VIT. and his immediate successors, 
after the ravages of the English were at an end. 



220 OF THE WAGES OF LABOUR. [cH. IV. 

long a period as between sixty and seventy years, 
unless some peculiar cause or causes had restrained 
the supply of population, compared with the supply 
of corn and the demand for labour. 

It is with the fact however of the very high wages 
of labour in the 15th century rather than with the 
causes of it, that we are mainly concerned at present, 
and of the fact there can be no doubt ; but if the fact, 
be allowed, it follows, that such wages must have 
very greatly fallen during the course of the following 
century, if the mines of America had not been dis- 
covered. 

What effect the depreciation of money might have 
had in aggravating that increasing poverty of the 
lower classes of society, which, with or without such 
a depreciation, would inevitably have fallen upon 
them, it is not easy to say. But from the still lower 
wages which prevailed in the 17th century after the 
depreciation had ceased, and from what has happen- 
ed of late years (which shall be more fully noticed 
presently) 1 should not be disposed to consider a 
general rise in the price of corn, occasioned by an 
alteration in the value of money, and not by bad sea- 
sons, as likely to affect the labouring classes prejudi- 
cially for more than a very few years. Still, however, 
it is quite certain that the condition of the labouring 
classes of society was growing much worse during 
the time that the depreciation of money from the dis- 
covery of the American mines was taking place ; and 
whatever may have been the cause, as the people 
would always be comparing their situation with what 
it had been, in their own recollection, and that of 
their fathers, it would inevitably excite great com- 
plaints ; and, after it had grown comparatively very 
bad, as in the latter end of the reign of Elizabeth, it 
was likely to lead to those measures relating to the 
poor, which marked this period of our history. 

Another inference which we may draw from the 
review is, that during the course of nearly 500 years, 



SEC. V.] OF THE WAGES OF LABOUR. 221 

the earnings of a day's labour in this country have 
probably been more frequently below than above a 
peck of wheat ; that a peck of wheat may be consid- 
ered as something like a middle point, or rather 
above the middle point, about which the market 
wages of labour, varying according to the demand and 
supply, have oscillated ; and that the population of a 
country may increase with some rapidity, while the 
wages of labour are even under this point. 

The wages of day labour in France during the two 
last centuries, are said to have been pretty uniformly 
about the 20th part of a septier of wheat,* which 
would be a little above | of a peck; but just before 
the revolution, at the time of Arthur Young's tour in 
France, they were only about I of a peck. Since 
the revolution, they appear to have risen so as to 
command more than a peck. 

A third inference which we may draw from this 
review is, that the seasons have a very considerable 
influence on the price of corn, not only for two or 
three years occasionally, but for fifteen or twenty 
years together. These periods of unfavourable sea- 
sons seem to supersede all the other causes which 
may be supposed to have the greatest influence upon 
prices. An instance of this occurs after the great 
pestilence in the time of Edward III. One should 
naturally have thought that the quantity of good land 
being abundant, compared with the population, corn 
would have been very cheap. It was however, on 
the contrary, dear during the twenty-five subsequent 
years, — a fact which cannot be accounted for but 
from unfavourable seasons. 

Another instance of the same kind had occurred in 
the reign of Edward II., during the whole of which, 
the average price of wheat was more than double 
what it had been during the greatest part of the reign 

* Wealth of Natious, b. i. c. xi. p. 313. 



222 OF THE WAGES OF LABOUR. [CH. tV. 

of Edward L, and the first half of the reign of Edward 
III. — evidently owing to unfavourable seasons. 

A third instance occurs during the civil wars of the 
17th century. So far from thinking that civil wars 
have a necessary tendency to make corn dear, I am 
disposed to agree with Sir. F. Eden, in attributing a 
part of the high price of labour and the cheapness of 
corn in the 15th century, to the circumstance of a 
greater destruction of men than of cultivation having 
been occasioned in the civil wars of the Houses of 
York and Lancaster. But in the civil wars of the 
17th century no such cheapness of corn took place. 
On the contrary, in the period from 1646 to 1665 
the price of corn was higher both in France and Eng- 
land than it had ever been known for twenty years 
together, either before or since, exclusive of the prices 
of the last twenty-five years in this country. For 
shorter periods, these unfavourable seasons are of fre- 
quent recurrence, and must essentially affect the con- 
dition of the labourer during ten or five years. It 
depends upon their continuance and other concomi- 
tant circumstances, whether they raise the money 
wages, or leave them as they were. 

The periods of the lowest wages, or of the greatest 
falls in real wages have been, when a considerable 
rise in the price of corn has taken place under circum- 
stances not favourable to a proportionate rise in the 
price of labour. This is the most likely to happen in 
unfavourable seasons, when the power of command- 
ing labour at the old price would by no means be 
increased in proportion to the price of corn. It may 
also happen when a fall is taking place in the value of 
money, if any previous causes have given an extraor- 
dinary stimulus to the progress of population. In this 
case, though the resources of the country may be 
increasing fast, the population may be increasing 
faster, and the wages of labour will not rise in propor- 
tion to the fall in the value of money. To this cause 
1 am strongly disposed to attribute the inadequate rise 



*3EC. V.] OF THE WAGES OF LABOUR. 223 

of the money wages of labour during the reigns of 
Henry VIII., Mary, Edward VI., and Elizabeth. The 
state of things in the early part of the 16th century 
must have given a powerful stimulus to population ; 
and considering the extraordinary high corn wages at 
this period, and that they could only fall very gradual- 
ly, the stimulus must have continued to operate with 
considerable force during the greatest part of the cen- 
tury. In fact, depopulation was loudly complained of 
at the end of the 15th and beginning of the 16th cen- 
turies, and a redundancy of population was acknow- 
ledged at the end of the 16th. And it was this change 
in the state of the population, and not the discovery 
of the American mines, which occasioned so marked 
a fall in the corn w r ages of labour. 

If the discovery of the American mines had found 
the labouring classes of the people earning only the 
same wages which they appear to have earned in the 
latter half of the reign of Edward III., and if the same 
increase of capital and resources had taken place dur- 
ing the 16th century, as really did take place, I feel 
not the slightest doubt, that the money wages of labour 
would have increased as fast as the money price of 
corn. Indeed when a fall in the value of money is 
accompanied, as it frequently is, by a rapid increase 
of capital, there is one reason, why, in the natural 
state of things, the price of labour should feel it more 
than other commodities. The encouragement given 
to population by such increase of resources, could not 
appear with any effect in the market under sixteen or 
eighteen years ; and in the mean time the demand 
compared with the supply of labour would be greater 
than the demand compared with the supply of most 
other commodities. 

It is on this account, that in the fall in the value of 
money which took place from 1793 to 1814, and 
which was .unquestionably accompanied by a great 
increase of capital, and a great demand for labour, I 
am strongly of opinion, that if the price of labour had 



224 OF THE WAGES OF LABOUR. CH. IV. 

not been kept down by artificial means, it would have 
risen higher in proportion than the average price of 
corn ; and this opinion is, I think, fairly borne out by 
facts. If according to the last authentic accounts 
which had been obtained of the price of labour, pre- 
vious to 1814, it appears that on an average of the 
returns of thirty-seven counties in 1810 and 1811, the 
weekly wages of day labour were 145. 6d., — a price, 
which, compared with the wages of 1767, 1768 and 
1770,* is equal to the rise in the price of wheat during 
the same period, while it is known that in many coun- 
ties and districts in the southern parts of England, 
wages in 1810 and 1811, were unnaturally kept down 
to 125., 105., 95. and even 75. 6d. by the baneful system 
of regularly maintaining the children of the poor out of 
the rates, it may fairly be concluded that if this sys- 
tem had not prevailed over a large part of England, 
the wages of labour would have risen higher than in 
proportion to the price of wheat. 

And this conclusion is still further confirmed by 
what has happened in Scotland and some parts of 
the north of England. In these districts, all accounts 
agree that the rise of wages was in fact greater than 
the rise of corn, and that the condition of the labourer 
till 1814 was decidedly improved, even in spite of the 
taxes, many of which certainly bore heavily on the 
conveniences and comforts of the labourer, though 
they affected but little his command over strict neces- 
saries. 

In considering the corn wages of labour in the 
course of this review, it has not been possible to 
make any distinction between the effects of a fall in 
the price of corn and a rise in the price ,of labour. 
In merely comparing the two objects with each other, 
the result is precisely similar ; but their effects in the 
encouragement of population are sometimes very dis- 
similar, as 1 have before intimated. There is no 

• Annals of Agriculture, No. 271. pp. 215 and 216. 



SEC. V.] OF THE WAGES OF LABOUR. 225 

doubt that a great encouragement to an increase of po- 
pulation is consistent with a fall in the price of raw pro- 
duce, because, notwithstanding this fall, the exchange- 
able value of the whole produce of the country may 
still be increasing compared with labour; but it may 
sometimes happen that a fall in the price of raw pro- 
duce is accompanied by a diminished power and will 
to employ labour ; and in this case the demand for 
labour and the encouragement to population will not 
be in proportion to the apparent corn wages of la- 
bour. 

If a labourer commands a peck instead of I of a peck 
of wheat a day in consequence of a rise of wages oc- 
casioned by a demand for labour, it is certain that all 
labourers may be employed who are willing and able 
to work, and probably also their wives and children ; 
but if he is able to command this additional quantity 
of wheat on account of a fall in the price of corn 
which diminishes the capital of the farmer, the ad- 
vantage may be more apparent than real, and though 
labour for some time may not nominally fall, yet as 
the demand for labour may be stationary, if not re- 
trograde, its current price will not be a certain criteri- 
on of what might be earned by the united labours of 
a large family, or the increased exertions of the head 
of it iu task- work. 

It is obvious, therefore, that the same current corn 
wages will, under different circumstances, have a dif- 
ferent effect in the encouragement of population. 

It should also be observed, that in estimating the 
corn wages of labour I have uniformly taken wheat, 
the dearest grain. I have taken one grain to the ex- 
clusion of other necessaries, because I wish to avoid 
complicating the subject ; and have chosen wheat be- 
cause it is the main food of the greatest part of the 
population in England. But it is evident that at 
those periods, or in those countries, in which the main 
food of the people does not consist of wheat, the 
wheat wages that can be earned by a family will not 

29 



226 OF THE WAGES OF LABOUR. [cH. IV. 

form a just criterion of the encouragement given to 
population. Although the wheat wages might be 
very unequal at two different periods or in two dif- 
ferent countries, jet if in one case an inferior grain 
were habitually consumed, the encouragement to the 
population might be the same. The Irish labourer 
cannot command the support of so large a family up- 
on wheat as the English, but he can command in ge- 
neral the support of a much larger family upon the 
food on which he is accustomed to live ; and conse- 
quently, population has increased much faster during 
the last century in Ireland than in England. 

It appears then that, making a proper allowance 
for the varying value of other parts of the wages of 
labour besides food, the quantity of the customary 
grain which a labouring family can actually earn, is 
at once a measure of the encouragement to population 
and of the condition of the labourer ; while the mo- 
ney price of such wages is the best measure of the 
value of money as far as one commodity can go. 
But it is of the utmost importance always to bear in 
mind that a great command over the necessaries of 
life may be effected in two ways, either by rapidly 
increasing resources, or by the prudential habits of 
the labouring classes ; and that as rapidly increasing 
resources are neither in the power of the poor to ef- 
fect, nor can in the nature of things be permanent, 
the great resource of the labouring classes for their 
happiness must be in those prudential habits which, 
if properly exercised, are capable of securing to the 
labourer a fair proportion of the necessaries and con- 
veniences of life, from the earliest stage of society to 

the latest. 

I have said nothing of the value of labour as meas- 
ured by the criterion assumed by Mr. Ricardo, that 
is, by the labour which has been expended in procur- 
ing the earnings of the labourer, or the cost in labour 
of the labourer's wages; because it appears to me, 
that what I have called the real and nominal wages 



SEC. V.] OF THE WAGES OF LABOUR. 227 

of labour include every thing which relates to the 
condition of the labourer, the encouragement to popu- 
lation, and the value of money, the three great points 
which chiefly demand our attention. According to 
Mr. Ricardo's view of the subject, nothing can be 
inferred on these points either from high or from low 
wages. Such high or low wages serve only to de- 
termine the rate of profits, and their influence in this 
Tespect will be fully considered in the next chapter. 



( 228 ) 



CHAPTER V. 



OF THE PROFITS OF CAPITAL. 



SECTION I. 

Of Profits as affected by the increasing Difficulty of procur- 
ing the Means of Subsistence. 

It has been usual, in speaking of that portion of the 
national revenue which goes to the capitalist in re- 
turn for the employment of his capital, to call it by 
the name of the profits of stock. But stock is not 
so appropriate an expression in this case, as capital 
Stock is a general term, and may be defined to be 
all the material possessions of a country, or all its 
actual wealth, whatever may be its destination ; while 
capital is that particular portion of these possessions, 
or of this accumulated wealth, which is destined to 
be employed with a view to profit. They are often, 
however, used indiscriminately ; and perhaps no 
great error may arise from it ; but it may be useful 
to recollect that all stock is not properly speaking 
capital, though all capital is stock. 

The profits of capital consist of the difference be- 
tween the value of the advances necessary to pro- 
duce a commodity, and the value of the commodity 
when produced;" and these advances are generally 
composed of accumulations which have previously 
cost in their production a certain quantity of wages, 
profit and rent, exclusive of the rent which, in the 
case of landed products, is paid directly. 



SEC. I.] OF THE PROFITS OF CAPITAL. 

The rate of profits is the proportion which the 
difference between the value of the advances and the 
value of the commodity produced bears to the value 
of the advances, and it varies with the variations of 
the value of the advances compared with the value of 
the product. When the value of the advances is 
great compared with the value of the product, the re- 
mainder being small, the rate of profits will be low. 
When the value of the advances is inconsiderable, the 
remainder being great, the rate of profits will be 
high. 

The varying rate of profits, therefore, obviouslv 
depends upon the causes which alter t 1 ^ portion 
between the value of the advances an ilue o 4 ' 

the produce; and this proportion p 
either by circumstances which affect 
advances, or the value of the product 

Of the advances necessary to prod^. 
of supporting labour are generally the & , _ 
most important. These means, therefore, will 
the greatest influence on the value of the advanc 

The two main causes which influence the t 
of supporting labour, are 

1st. The difficulty or facility of production on t, 
land, by which a greater or less proportion o e 
value of the whole produce is capable of supporting 
the labourers employed. 

And 2dly, The varying relation of the quantity of 
capital to the quantity of labour employed by it, by 
which more or less of the necessaries of life may go 
to each individual labourer. 

Each of these causes is alone sufficient to occasion 
all the variations of which profits are susceptible. If 
one of them only acted, its operation would be sim- 
ple. It is the combination of the two, and of others 
in addition to them, sometimes acting in conjunction 
and sometimes in opposition, which occasions in the 
progress of society those varied phenomena which it 
is not always easy to explain. 



V 



230 



OF THE PROFITS OF CAPITAL. [CH. V. 



If the first cause operated singly, and the wages 
of the individual labourer were always the same, 
the t suSo ring that the skill in agriculture were to 
i^mchaiged, and that there were no means of 
oUato corn from foreign countries, the rate of 
^s rlust regularly and without W^SS 

Lndbr ? Id not allow it to be cultivate, lW ~ 
W e least, obtain the same rent for 

- must be considered as an absolute cor 

orst lands taken into cultivation in a 
rv Aft^ fh{ * riavment was madt-. 
.lie produce would be divided chiefly* 
^o capitalists and the labourers, and it is 
nt that if the number of labourers necessary to 
n a given produce were continually increasing, 
he wages of each labourer remained the same, 
portion destined to the payment of labour would 
e continually encroaching upon the portion destined 
. t ie payment of profits ; and the rate of profits 
would of course continue regularly diminishing till, 
from the want of power or will to save, the progress 
of accumulation had ceased. 

In this case, and supposing an equal demand tor 
all the parts of the same produced it is obvious that 

* I say chiefly, because, in fact, some rent, though it may be trifling, is almost al- 
ways paid in the materials of the farmer's capital. 

+ It is necessary to qualify the position in this way, because, with regard to the 
ma + inVroducts 9 o ragricult«re, it might easily happen that all the parts were not of 
The came value If a farmer cultivated his lands by means of domestics living in 
£ hoSe whom he found in food and clothing his advances mght always i be i near y 
the ame in quantity and of the same high value in use ; but in the case of a glut 
Lorn the shutting up of an accustomed market, or a season of unusual abundance a 
oa nofthecror ra iSht be of no value either in use or exchange, and his profits 
Sd by nome P aSbe determined, . by the excess of the quantity produced, above 
the advances necessary to produce it. 



SEC* I.] OF THE PROFITS OF CAPITAL. 231 

the profits of capital in agriculture would be in pro- 
portion to the fertility of the last land taken into 

ultivation, or to the amount of the produce obtained 

y a given quantity of labour. And as profits in the 

ime country tend to an equality, the general rate of 

iofits would follow the same course. 

But a moment's consideration will shew us, that 
the supposition here made of a constant uniformity in 
the real wages of labour is not only contrary to the 
actual state of things, but involves a contradiction. 

The progress of population is almost exclusively 
regulated by the quantity of the necessaries of life 
actually awr ded to the labourer ; and if from the first 
he had no more than sufficient to keep up the actual 
population, the labouring classes could not increase, 
nor would there be any occasion for the progressive 
cultivation of poorer land. On the other hand, if the 
real wages of labour were such as to admit of and 
encourage an increase of population, and yet were 
always to remain the same, it would involve the con- 
tradiction of a continued increase of population after 
the accumulation of capital, and the means of sup- 
porting such an increase had entirelv ceased. 

We cannot then make the supposition of a natural 
and constant price of labour, at least if we mean by 
such a price, an unvarying quantity of the necessaries 
pi lile. And if we cannot fix the real price of labour, 
it must evidently vary with the progress of capital 
and revenue, and the demanrf for labour compared 
with the supply. L 

We may however, if we please, suppose a uniform 
progress of capital and population, by which is not 
meant in the present case the same rate of progress 
permanently, whicrl is impossible ; but a unifornTpro- 
gress towards the greatest practicable amount, without 
temporary accelerations or retardations. And before 
we proceed to the actual state of things, it may be 
curious to consider in what manner profits would be 
aitected under these circumstances. 



OF THE PROFITS OF CAPITAL. [CH. V. 

At the commencement of the cultivation of a fertile 
country by civilized colonists, and while rich land 
was in great plenty, _a small portion only of the value 
of the produce would be paid in the form of rent. 
Nearly the whole would be divided between profits 
and wages ; and the proportion which each would 
take, as far as it was influenced by the share of each 
individual labourer, must be determined by the de- 
mand and supply of capital compared with the demand 
and supply of labour. 

As the society continued to proceed, it the territory 
were limited, or the soil of different qualities, it is 
quite obvious that the productive powers^of labour as 
applied to the cultivation of land must gradually di- 
minish ; and as a given quantity of capital and of 
labour would yield a smaller and smaller return, there 
would evidently be a less and less produce to be divid- 
ed between labour and profits. 

If, as the powers of labour diminished, the physical 
wants of the labourer were also to diminish in the same 
proportion, then the same share of the whole produce 
might be left to the capitalist, and the rate of profits 
would not necessarily fall. But the physical wants of 
the labourer remain always the same ; and though m 
the progress of society, from the increasing scarcity of 
provisions compared with labour, these wants are in 
general less fully supplied, and the real wages of la- 
bour gradually fall :.„yet it is clear that there is a 
limit, and probably at no great distance, which cannot 
be passed. The command of a certain quantity of 
food is absolutely necessary to the labourer in order 
to support himself, and such a family as will maintain 
merely a stationary population. Consequently, if 
poorer lands which required more labour were suc- 
cessivelv taken into cultivation, it would not be possi- 
ble for the corn wages of each individual labourer to 
be diminished in proportion to the diminished produce; 
a greater proportion of the whole would necessarily 
o- te to labour ; and the rate of profits would continue 



SEC. I.] OF THE PROFITS OF CAPITAL. 233 

regularly falling till the accumulation of capital had 
ceased. 

Such would be the necessary course of profits and 
wages in the progressive accumulation of capital, as 
applied to the progressive cultivation of new and less 
fertile land, or the further improvement of what had 
before been cultivated ; and on the supposition here 
made, the rates both of profits and of real wages 
would be highest at first, and would regularly mid 
gradually diminish together, till they both came to 
a stand at the same period, and the demand for an 
increase of produce ceased to be effective. 

In the mean time, it -ill be asked, what becomes 
of the profits of capital e ployed in manufactures and 
commerce, a species of L \ustry not like that employ- 
ed upon the land, whei the productive powers of 
labour necessarily dimini: ; but where these powers 
not only do not necessar diminish, but very often 
greatly increase ? 

In the cultivation of lai the immediate and main 
cause of the necessary dii tion of profits appeared 
to be the increased quan if labour necessary to 
obtain the same produce. manufactures and com- 

merce, it is the fall in the ngeable value of the 

products of industry in the artments, compared 

with corn and labour. 1 

; The cost of producing cc ibour continually 

increases from inevitable pj % 

cost of producing manufactures and articles ot com- ' 
merce sometimes diminishes, sometimes remains sta- 
tionary, and at all events increases much slower than 
the cost of producing corn and labour. Upon every 
principle therefore of demand and supply, the ex- 
changeable value of these latter objects must fall 
compared with the value of labour. But if the ex- 
changeable value of labour continues to rise, while the 
exchangeable value of manufactures either falls, re- 
mains the same, or rises in a much less degree, pro- 
tits must continue to fall ; and thus it appears that in 

30 



234 OF THE PROFITS OK CAPITAL. [CH. V. 

the nrosrress of improvement, as poorer and poorer 
and^faken into estivation the rate fj^^ 
be limited by the powers of the soil last ^, ate ^ 
If the last land taken into cultivation can only be 
made to yield a certain excess of ^ above the 
value of the labour necessary to .produce , it is oby 
ous that, upon the principles of competition profits 
generally, cannot possibly be higher than this excess 
will allow. In the ascending scale, this is a barrier 
wh eh cannot be passed. But limitation » essentwl- 
\, different from regulation. In the descending scale, 
profits may be lower in any degree. There is here 
So controlling necessity w ich determines the r^e 
of profits ; and below the mghest limit which the 
actual state of the land wil' dlow, ample scope is left 
for the operation of other ases. 






SEf 




Of Profits as affected by roportion which Capital bear, 

J hour. 

The second mair which, by increasing the 

amount of advanc ences profits, is the propor- 

*•,•■*' J labour. 

1U15 „ ouvioum, u cause wnicn afone ,s capaole 
of producing the very greatest effects ; and on he 
supposition of adequate variations taking place be- 
tween the supplies of capital and the supplies of la- 
Surfall the same effects might be produced on p o- 
Ss as by the operation of the first cause, and m a 
much shorter time. 

. , have stated in a forme, chapter, that the de.^! for . »^- ^X'ie 
upon capital alone, hut upon capital and revenue t°S«hcx, r the va ue 

J *. m-h* r» w^ r\ 



demand. 



SEC. II.] OF THE PROFITS OF CAPITAL. 235 

When capital is really abundant compared with 
labour, nothing can prevent low profits; and the 
greatest facility of production is incapable of produc- 
ing high profits, unless; capital is scarce compared 
with labour. 

But in order to see more clearly the powerful ef- 
fects of the second cause on profits, let us consider it 
for a moment as operating alone ; and suppose, that 
while the capital of a country continued increasing, 
its population were checked and kept short of the de- 
mand for it, by some miraculous influence. Under 
these circumstances, every sort of gradation might 
take place in the proportion which capital would 
S^bear to labour, and we should see in consequence 
v every sort of gradation take place in the rate of 
profits. 

If, in an early period ^ improvement, capital were 
scarce, compared with hfcmi^&e wages of labour 
being on this account low, while the productive pow- 
ers of labour, from the fertility of the land, were 
great, the proportion left for profits would necessarily 
be very considerable, and the rate of profits would be 
very high. 

In general, however, though capital may be said 
to be scarce in the early periods of cultivation, yet 
that particular portion of capital, which resolves it- 
self into food, is often plentiful compared with the 
population, and high profits and high real wages are 
found together. In the most natural state of things 

tni 5j^S eneralI 7 tne case > though it is not so when 
capitaT is prematurely checked by extravagance, or 
other causes. But whether we set out from low or 
high corn wages, the diminution in the rates of pro- 
fits, from the gradual increase of capital compared 
with labour, will remain undisturbed. 

As capital at any time increases faster than labour, 
the profits of capital will fall, and if a progressive 
increase of capital were to take place, while the popu- 
lation, by some hidden cause, were prevented from 






236 OF~THE PROFITS OF CAPITAL. [OH. T. 

keeping pace with it, notwithstanding the fertility of 
the soil and the plenty of food, tt ien profits would be 
gradually reduced, until, by successive reductions, 
the power and will to accumulate had ceased to 

operate. . , , 

Profits in this case 'would experience exactly the 
same kind of progressive diminution as they would 
by the progressive accumulation of capital m the 
present state of things ; but rent and wages would be 
very differently affected. From what has before been 
stated on the subject of rent, the amount of it in such 
a country could not be great. According to the sup- 
position, the progress cf the population is retarded, 
and the number of labourers is limited, while land ot 
considerable fertility remains uncultivated, lhe de- 
mand for fertile land therefore, compared with the sup- 
ply would be comparative 1 inconsiderable; and m 
reference to the whoie 01 the national produce, the 
portion which would consist of rent would depend 
mainly upon the gradations of more fertile land that 
had been cultivated before the population had come 
to a stop, and upon the value of the produce to be 
derived from the land that was not cultivated. 

With regard to wages they would continue pro- 
gressively to rise, and would give the labourer a 
Ireater command not only of manufactures and ol 
the products of foreign commerce (as is generally the 
case in the present state of things) but of corn and all 
other necessaries, so as to place him in a condition 
continually and in all respects improving, as long as 
capital continued to increase. . 

In short, of the three great portions into which the 
mass of produce is divided, rent, profits, and wages, 
the two first would be low, because both the supply 
of land and the supply of capital would be abundant 
compared with the demand; while the wages ol 
labour would be very high, because the supply ot 
labourers would be comparatively scanty ; and thus the 



SEC. II.] OF THE PROFITS OF CAPITAL. 237 

value of each would be regulated by the great prin- 
ciple of demand and supply. 

If, instead of supposing the population to be 
checked by some peculiar influence, we make the 
more natural supposition of a limited territory, with 
all the land of nearly equal quality, and of such 
great fertility as to admit of very little capital being 
laid out upon it, the effects upon the profits of capi- 
tal would be just the same as in the last instance, 
though they would be very different on rents and 
wages. After all the land had been cultivated, and 
no more capital could be employed on it, there can- 
not be a doubt that rents woifld be extremely high and 
profits and wages very low. VThe competition of in- 
creasing capital in manufactures and commerce would 
reduce the rate of profits, wh^e the principle of popu- 
lation would continue to augment the number of the 
labouring classes, till their corn wages were so low 
as to check their further increase. It is probable 
that, owing to the facility of production on the land 
and the great proportion of persons employed in 
manufactures and commerce, the exports would be 
great and the value of money veiy low. The money 
price of corn and money wages would perhaps be 
as high as when their cost in labour had been double 
or treble ; rents would rise to an extraordinary pitch 
without any assistance from poor lands, and the gra- 
dations of soil ; and profits might fall to the point 
only just sufficient tc keep up the actual capital with- 
out any additional labour being necessary to procure 
the food of the labourer. 

The effects which would obviously result from the 
two suppositions just made, clearly shew that the 
increasing quantity of labour required for the succes- 
sive cultivation of poorer land is not theoretically 
necessary to a fall of profits from the highest rate to 
the lowest. 

The former of these two suppositions further shews 
the extraordinary power possessed by the labouring 



238 OF THE PROFITS OF CAPITAL. [CH. V. 

classes of society, if they chose to exercise it. The 
comparative check to population, which was consid- 
ered as occasioned by some miraculous influence, 
mitf-ht in reality be effected by the prudence of the 
poor ; and it would unquestionably be followed by 
the result described. It may naturally appear hard 
to the labouring classes that, of the vast mass of pro- 
ductions obtained from the land, the capital, and the 
labour of the country, so small a portion should in- 
dividually fall to their share. But the division is at 
present determined, and must always in future be 
determined, by the inevitable laws of supply and 
demand. If the market were comparatively under- 
stocked with labour, foie landlords and capitalists 
would be obliged to give a larger share of the pro- 
duce to each workman^ But with an abundant sup- 
ply of labour, such a snare, for a permanence, is an 
absolute impossibility, The rich have neither the 
power, nor can it be expected that they should all 
have the will, to keep the market understocked with 
labour. Yet every effort to ameliorate the lot of the 
poor generally, that has not this tendency, is perfectly 
futile and childish. It is quite obvious therefore, that 
the knowledge and prudence of the poor themselves, are 
absolutely the only means by which any general im- 
provement in their condition can be effected, lhey 
are really the arbiters of their own destiny ; and what 
others can do for them, is like the dust of the balance 
compared with what they can do for themselves. 
These truths are so important to the happiness of the 
great mass of society, that every opportunity should 
be taken of repeating them. 

But, independently of any particular efforts ot 
prudence on the part of the poor, it is certain that 
the supplies of labour and the supplies of capital do 
not always keep pace with each other. They are 
often separated at some distance, and for a conside- 
rable period: and sometimes population increases 



9EC. II.] OF THE PROFITS OF CAPITAL. 239 

faster than capital, and at other times capital increases 
faster than population. 

It is obvious, for instance, that from the very nature 
of population, and the time required to bring full- 
grown labourers into the market, a sudden increase 
of capital cannot effect a proportionate supply of 
labour in less than sixteen or eighteen years ; and, on 
the other hand, when capital is stationary from the 
want of will to accumulate, it is well known that 
population in general continues to increase faster than 
capital, till the wages of labour are reduced to that 
standard which, with the actual habits of the country, 
are no more than sufficient to maintain a stationary 
population. 

These periods, in which capital and population do 
not keep pace with each other, are evidently of suf- 
ficient extent to produce the most important results 
on the rate of profits, and to affect in the most essen- 
tial manner the progress of national wealth. 

The value of the government long annuities has a 
natural and inevitable tendency to diminish as thev 
approach nearer and nearer to the end of the term 
for which they were granted. This is a proposition 
Which I conceive no person is inclined to doubt ; bur 
under the fullest acknowledgment of its truth, it 
would be a most erroneous calculation to estimate the 
value of this kind of stock solely by the number of 
years which it would have to run. It is well known 
that out of the comparatively short term of ninety 
years, so large a proportion as twenty has sometimes 
elapsed, not only without any diminution, but with 
an actual increase of value. 

In the same manner, the natural and necessary 
tendency of profits to fall in the progress of society, 
owing to the increasing difficulty of procuring food, 
is a proposition which few will be disposed to con- 
trovert ; but to attempt to estimate the rate of profits 
in any country by a reference to this cause alone, for 
ten, twenty, or even fifty years together, that is for 



240 OF THE PROFITS OF CAPITAL. [CH. V. 

periods of sufficient length to produce the most im- 
portant effects on national prosperity, would inevita- 
bly lead to the greatest practical errors. 

Yet notwithstanding the utter inadequacy of this 
single cause to account for existing phenomena, Mr. 
Ricardo, in his very ingenious chapter on profits, has 
dwelt on no other. 

If the premises were all such as he has supposed 
them to be, that is, if no other cause operated on 
profits than the increasing difficulty of procuring the 
food of the labourer, and no other cause affected 
the exchangeable and money value of commodities 
than the quantity of labour which they had cost in 
production, the conclusions which he has drawn 
would be just, and the rate of profits would certainly 
be regulated in the way which he has described. 
But, since in the actual state of things the premises 
are most essentially different from those which he has 
supposed ; since another most powerful cause operates 
upon profits, as I have endeavoured to shew in the 
present section ; and since the exchangeable value of 
commodities is not determined by the labour they have 
cost, as I endeavoured to shew in a former chapter, 
the conclusion drawn by Mr. Ricardo must necessa- 
rily contradict experience ; not slightly, and for short 
periods, as the market prices of some articles occa- 
sionally differ from the natural or necessary price, 
properly explained ; but obviously and broadly, and 
for periods of such extent, that to overlook them, 
would not be merely like overlooking the resistance 
of the air in a falling body, but like overlooking the 
change of direction given to a ball by a second im- 
pulse acting at a different angle from the first. 

It is impossible then to agree in the conclusion at 
which Mr. Ricardo arrives in his chapter on profits, 
" that in all countries, and at all times, profits depend 
upon the quantitv of labour required to provide ne- 



SEC. II.] OF THE PROFITS OF CAPITAL. 241 



cessaries for the labourer on that land, or with that 
capital which yields no rent."* 

If by the necessaries of the labourer be meant, 
such wages as will just keep up the population, or what 
Mr. Ricardo calls the natural wages of labour, it is 
the same as saying that land of equal fertility will 
always yield the same profits — a proposition which 
must necessarily be untrue. 

If, for instance, in one country, with the last land 
taken into cultivation of a given fertility, capital were 
stationary, not from want of demand, but from great 
expenditure and the want of saving habits, it is cer- 
tain that labour, after a time, would be paid very low, 
and profits would be very high. 

If, in another country with similar land in cultiva- 
tion, such a spirit of saving should prevail as to occa- 
sion the accumulation of capital to be more rapid than 
the progress of population, it is as certain that profits 
would be very low. 

So understood therefore, the proposition cannot for 
a moment be maintained. 

If, on the other hand, by necessaries be meant the 
actual earnings of the labourer, whatever they may 
be, the proposition is essentially incomplete. Even 
allowing that the exchangeable value of commodities 
is regulated by the quantity of labour that has been 
employed in their production, (which it has been 
shewn is not so,) little is done towards determining 
the rate of profits. It is merely a truism to say that 
if the value of commodities be divided between la- 
bour and profits, the greater is the share taken by 
one, the less will be left for the other ; or in other 
words, that profits fall as labour rises, or rise as 
labour falls. We can know little of the laws which 
determine profits, unless, in addition to the causes 
which increase the price of necessaries, we explain 

* Prioc. of Polit. Econ. c. vi. p. 133. 2J edit. 

31 



242 OF THE PROFITS OF CAPITAL. fCH. V. 

the causes which award a larger or a smaller share 
of these necessaries to each labourer. And here it is 
obvious that we must have recourse to the great prin- 
ciples of demand and supply, or to that very princi- 
ple of competition brought forward by Adam Smith, 
which Mr. Rieardo expressly rejects, or at least con- 
siders as of so temporary a nature as not to require 
attention in a general theory of profits.* 

And yet in fact there is no other cause of perma- 
nently high profits than a deficiency in the supply of 
capital ; and under such a deficiency, occasioned by 
extravagant expenditure, the profits of a particular 
country might for hundreds of years together continue 
very high, compared with others, owing solely to the 
different proportions of capital to labour. 

In Poland, and some other parts of Europe, profits 
are said to be higher than in America ; yet it is proba- 
ble that the last land taken into cultivation in Ameri- 
ca is richer than the last land taken into cultivation 
in Poland. But in America the labourer earns per- 
haps the value of sixteen or eighteen quarters of 
wheat in the year ; in Poland only the value of eight or 
nine quarters of rye. This difference in the division 
of the same or nearly the same produce, must make 
an extraordinary difference in the rate of profits ; yet 
the causes which determine this division can hardly 
be said to form any part of Mr. Ricardo's theory of 
profits, although, far from being of so temporary a 
nature that they may be safely overlooked, they might 
contribute to operate most powerfully for almost any 
length of time. Such is the extent of America, that 
the price of its labour may not essentially fall for 
hundreds of years ; and the effects of a scanty but 
stationary capital on an overflowing but stationary 
population might last for ever. 

In dwelling thus upon the powerful effects which 
must inevitably be produced by the proportion which 
capital bears to labour, and upon the necessity of 

* Princ. of Polit. Econ. chap. vi. p. 132. and ch. xxi. 2d edit 



SEC* III.] OF THE PROFITS OF CAPITAL. 245 

giving adequate weight to the principle of demand 
and supply or competition, in every explanation of the 
circumstances which determine profits, it is not meant 
to underrate the importance of that cause which has 
been almost exclusively considered by Mr. Ricardo. 
It is indeed of such a nature as finally to overwhelm 
every other. To recur to the illustration already used 
— as the Long Annuities approach nearer and nearer 
to the term at which they expire, their value must 
necessarily so diminish, on this account alone, that no 
demand arising from plenty of money could possibly 
keep up their value. In the same manner, when cul- 
tivation is pushed to its extreme practical limits, that 
is, when the labour of a man upon the last land 
taken into cultivation will scarcely do more than sup- 
port such a family as is necessary to maintain a sta- 
tionary population, it is evident that no other cause 
or causes can prevent profits from sinking to the low- 
est rate required to maintain the actual capital. 

But though the principle here considered is finally 
of the very greatest power, yet its progress is ex- 
tremely slow and gradual ; and while it is proceeding 
with scarcely perceptible steps to its final destination, 
the second cause, particularly when combined with 
others which will be noticed in the next section, is 
producing effects which entirely overcome it, and 
often for twenty or thirty, or even 100 years together, 
make the rate of profits take a course absolutely dif- 
ferent from what it ought to be according to the first 



cause. 



SECTION III. 

Of Profits as affected by the Causes practically in operation. 

We come now to the consideration of the causes 
which influence profits in the actual state of things. 



244 OF THE PROFITS OF CAPITAL. [CH. V- 

And here it is evident that we shall have in operation 
not only both the causes already stated, but others 
which will variously modify them. 

In the progressive cultivation of poorer land for 
instance, as capital and population increase, profits, 
according to the first cause, will regularly fall ; but if 
at the same time improvements in agriculture are 
taking place, they may certainly be such as, for a con- 
siderable period, not only to prevent profits from fall- 
ing, but to allow of a considerable rise. To what 
extent, and for what length of time, this circumstance 
might interrupt the progress of profits arising from the 
first cause, it is not easy to say ; but, as it is certain 
that in an extensive territory, consisting of soils not 
very different in their natural powers of production, 
the fall of profits arising from this cause would be 
extremely slow, it is probable that for a considerable 
extent of time, agricultural improvements, including of 
Course the improved implements and machinery used 
in cultivation, as well as an improved system of crop- 
ping and managing the land, might more than bal- 
ance it. 

A second circumstance which would contribute to 
the same effect is, an increase of personal exertion 
among the labouring classes. This exertion is ex- 
tremely different in different countries, and at different 
times in the same country. A day's labour of a Hin- 
doo, or a South-American Indian, will not admit of a 
comparison with that of an Englishman ; and it has 
even been said, that though the money price of day- 
labour in Ireland is little more than the half of what 
it is in England, yet that Irish labour is not really 
cheaper than English, although it is well known that 
Irish labourers when in this country, with good exam- 
ples and adequate wages to stimulate them, will work 
as hard as their English companions. 

This latter circumstance alone clearly shews how 
different may be the personal exertions of the labour- 
ing classes in the same country at different times ; and 



SEC. III.] OF THE PROFITS OF CAPITAL. 245 

how different therefore may be the products of a given 
number of days labour, as the society proceeds from 
the indolence of the savage to the activity of the civi- 
lized state. This activity indeed, within certain lim- 
its, appears almost always to come forward when it is 
most called for, that is, when there is much work to 
be done without a full supply of persons to do it. The 
personal exertions ol the South American Indian, the 
Hindoo, the Polish boor, and the Irish agricultural 
labourer, may be very different indeed 500 years 
hence. 

The two preceding circumstances tend to diminish 
the expenses of production, or to reduce the relative 
amount of the advances necessary to obtain a certain 
value of produce. Bat it was stated at the beginning 
of this chapter, that profits depend upon the prices of 
products compared with the expenses of production, 
and must vary therefore with any causes which affect 
prices without proportionally affecting costs, as well as 
with any causes which affect costs without proportion- 
ally affecting prices. 

A considerable effect on profits may therefore be 
occasioned by a third circumstance which not unfre- 
quently occurs, namely, the unequal rise of some parts 
of capital, when the price of corn is raised by an 
increased demand. I was obliged to allude to this 
cause, and indeed to the two preceding ones, in the 
chapter on rents. [ will only therefore add here, that 
when the prices of corn and labour rise and terminate 
in an altered value of money, the prices of many home 
commodities will be very considerably modified for 
some time, by the unequal pressure of taxation, and 
by the different quantities of fixed capital employed in 
their production ; and the prices of foreign commodi- 
ties and of the commodities worked up at home from 
foreign materials, will permanently remain compara- 
tively low. The rise of corn and labour at home will 
not proportionally raise the price of such products ; 
and as far as these products form any portion of the 



246 OF THE PROFITS OF CAPITAL. [CH. V. 

farmer's capital this capital will be rendered more pro- 
ductive ; but leather, iron, timber, soap, candles, 
cottons, woollens, &c. &c. all enter more or less into 
the capitals of the farmer, or the wages of the labour- 
er, and are all influenced in their prices more or less 
by importation. While the value of the farmer's pro- 
duce rises, these articles will not rise in proportion, 
and consequently a given value of capital will yield a 
greater value of produce. 

All these three circumstances, it is obvious, have a 
very strong tendency to counteract the effects arising 
from the necessity of taking poorer land into cultiva- 
tion ; and it will be observed that, as they are of a 
nature to increase in efficiency with the natural pro- 
gress of population and improvement, it is not easy to 
say how long and to what extent they may balance 
or overcome them. 

The reader will be aware that the reason why, in 
treating of profits, I dwell so much on agricultural 
profits is, that the whole stress of the question rests 
upon this point. The argument against the usual 
view which has been taken of profits, as depending 
principally upon the competition of capital, is found- 
ed upon the physical necessity of a fall of profits in 
agriculture, arising from the increasing quantity of 
labour required to procure the same food ; and it is 
certain that if the profits on land permanently fall 
from this or any other cause, profits in manufactures 
and commerce must fall too, as it is an acknowledged 
truth that in an improved and civilized country the 
profits of stock, with few and temporary exceptions 
which may be easily accounted for, must be nearly 
on a level in all the different branches of industry to 
which capital is applied. 

Now I am fully disposed to allow the truth of this 
argument, as applied to agricultural profits, and also 
its natural consequences on all profits. This truth 
is indeed necessarily involved both in the Principle of 
Population and in the theory of rent which I publish- 



SEC. III.] OF THE PROFITS OF CAPITAL. 247 

ed separately in 1815. But I wish to shew, theo^- 
retically as well as practically, that powerful and 
certain as this cause is, in its final operation, so 
much so as to overwhelm every other ; yet in the 
actual state of the world, its natural progress is not 
only extremely slow, but is so frequently counteract- 
ed and overcome by other causes, as to leave very 
great play to the principle of the competition of 
capital ; so that at any one period of some length in 
the last or following hundred years, it might most 
safely be asserted that profits had depended or would 
depend very much more upon the causes which had 
occasioned a comparatively scanty or abundant supply 
of capital, than upon the natural fertility of the land 
last taken into cultivation. 

The facts which support this position are obvious 
and incontrovertible. Some of them have been 
stated in the preceding section, and their number 
might easily be increased. I will only add however 
one more, which is so strong an instance as to be 
alone almost decisive of the question, and havin^ 
happened in our own country, it is completely open 
to the most minute examination. 

From the accession of George II. in 1727 to the 
commencement of the war in 1739, the interest of 
money was little more than 3 per cent. The public 
securities which had been reduced to 4 per cent 
rose considerably after the reduction. According to 
Chalmers, the natural rate of interest ran steadily at 
3 per cent. ;* and it appears by a speech of Sir Johu 
barnard's that the 3 per cent, stocks sold at a premi- 
um upon Change. In 1750, after the termination of 
the war, the 4 per cent, stocks were reduced to 3h % 
for seven years, and from that time to 3 per cent, per- 
manently.f r 

* Estimate of the Strength of Great Biitain, c. vii. p. H' 
Id. ch. vii p. 120. 



248 OF THE PROFITS OF CAPITAL. [CH. V. 

Excluding then the interval of war, we have here 
a period of twenty-two years, during which the 
general rate of interest was between 3h and 3 per 

cent. 

The temporary variations in the value of govern- 
ment securities will not certainly at all times be a cor- 
rect criterion of the rate of profits or even of the rate 
of interest ; but when they remain nearly steady for 
some time together, they must be considered as a fair 
approximation to a correct measure of interest ; and 
when the public creditors of a government con- 
sent to a great fall in the interest which they had 
before received, rather than be paid off, it is a most de- 
cisive proof of a great difficulty in the means of em- 
ploying capital profitably, and consequently a most 
decisive proof of a low rate of profits. 

After an interval of nearly seventy years from the 
commencement of the period here noticed, and forty 
years from the end of it, during which a great 
accumulation of capital had taken place, and an 
unusual quantitv of new land had been brought into 
cultivation, we find a period of twenty years succeed 
in which the average market rate of interest was 
rather above than below 5 per cent. ; and we have 
certainly every reason to think, from the extraordina- 
ry rapidity with which capital was recovered, after it 
had been destroyed, that the rate of profits in general 
was quite in proportion to this high rate of interest. 

The difficulty of borrowing on mortgage during a 
considerable part of the time is perfectly well known , 
and though the pressure of the public debt might 
naturally be supposed to create some alarm, and in- 
cline the owners of disposable funds to give a prefer- 
ence to landed security ; yet it appears from the 
surveys of Arthur Young, that the number of years 
purchase given for land was in 1811, 29*, and forty 
years before, 32 or 32*,*— the most decisive proof 

* Annalsof Apiculture, No. 270. pp.98, and 97 and No. 271. p. 215. Mr. 
Yw^pi^SS^abi; surprize a 7th«e results, and does not seem sufficient- 



SEC. III.] OF THE PROFITS OF CAPITAL. 249 

that can well be imagined of an increase in the pro- 
fits of capital employed upon land. 

The different rates of interest and profits in the 
two periods here noticed are diametrically opposed 
to the theory of profits founded on the natural quality 
of the last land taken into cultivation. The facts, 
which are incontrovertible, not only cannot be ac- 
counted for upon this theory, but in reference to it, 
either exclusively or mainly, they ought to be di- 
rectly the reverse of what they are found to be in 
reality. 

The nature of these facts, and the state of things 
under which they took place, (in the one case, in a 
state of peace with a slack demand for agricultural 
products, and in the other, a state of war with an 
unusual demand for these products,) obviously and 
clearly point to the relative redundancy or deficiency 
of capital, as, according to every probability, con- 
nected with them. And the question which now 
remains to be considered, is, whether the circum- 
stances which have been stated in this section are 
sufficient to account theoretically for such a free 
operation of this principle, notwithstanding the pro- 
gressive accumulation of capital, and the progressive 
cultivation of fresh land, as to allow of low profits 
at an earlier period of this progress and high profits 
at a later period. At all events, the facts must be 
accounted for, as they are so broad and glaring, 
and others of the same kind are in reality of such 
frequent recurrence, that I cannot but consider them 
as at once decisive against any theory of profits which 
is inconsistent with them. 

In the first period of the two which have been 
noticed, it is known that the price of corn had fallen, 
but that the wages of labour had not only not fallen 
in proportion, but had been considered by some 

ly aware, th** the number of years purchase given for land has nothing to do with 
prices but mainly expresses the abundance or scarcity of movable capital coioouied 
with the mean? of employing it. 






250 OF THE PROFITS OF CAPITAL. [CH. V. 

authorities as having risen. \dam Smith states the 
fall of corn and the rise of labour during the first 
sixty-four years of the last century as a sort of estab- 
lished fact ;* but Arthur Young/ in his very useful 
inquiries into the prices of corn and labour published 
in his Annals of Agriculture, seems to think with 
some reason, that the fact is not well authenticated, 
and is besides a little inconsistent with the apparently 
slack demand for labour and produce and compara- 
tively slow progress of population, which took place 
during the period in question.f Allowing, however, 
even a stationary price of labour, with a falling price 
of corn, and the fall of agricultural profits is at once 
accounted for. Such a state of prices might alone 
be much more than sufficient to counteract the effects 
arising from the circumstance of pretty good land 
being yet uncultivated. When we add, that the other 
outgoings belonging to the farmers' capital, such as 
leather, iron, timber, &c. &c, are supposed to have 
risen while his main produce was falling, we can be 
at no loss to account for a low rate of agricultural 
profits, notwithstanding the unexhausted state of the 
country. And as to the low rate of mercantile and 
manufacturing profits, that would be accounted for at 
once by the proportion of capital to labour. 

In the subsequent period, from 1793 to 1813, it is 
probable that all the circumstances noticed in this sec- 
tion concurred to give room for the operation of that 
principle which depends upon the proportion of capi- 
tal to labour. 

In the first place, there can be no doubt of the 
improvements in agriculture which were going for- 
wards during these twenty years, both in reference to 
the general management of the land and the instru- 
ments which are connected with cultivation, or which 
in any way tend to facilitate the bringing of raw produce 

* Wealth of Nations, Book I. cb. xi. p. 309. 313. 6th edit 
f Annals of Agriculture, No. 270. p. 89. 



SEC. III.] OF THE PROFITS OF CAPITAL. 251 

to market. 2dly, the increasing practice of task-work 
during these twenty years, together with the increas- 
ing employment of women and children, unquestiona- 
bly occasioned a great increase of personal exertion ; 
and more work was done by the same number of per- 
sons and families than before. 

These two causes of productiveness in the powers 
of labour were evidently encouraged and in a manner 
called into action by the circumstances of the times, 
that is, by the high price of corn, which encouraged 
the employment of more capital upon the land with 
the most effective modes of applying it, and by the 
increasing demand for labour, owing to the number 
of men wanted in the army and navy at the same time 
that more than ever were wanted in agriculture and 
manufactures. 

The third cause, which had a very considerable 
effect, much more indeed than is generally attributed 
to it, was a rise in the money price of corn without a 
proportionate rise in mercantile and manufacturing 
produce. This state of things always allows of some 
diminution in the corn wages of labour without a 
proportionate diminution of the comforts of the labour- 
er ; and if the money price of the farmer's produce 
increases without a proportionate increase in the price 
of labour and of the materials of which his capital 
consists, this capital becomes more productive and his 
profits must necessarily rise. 

In a country in which labour had been well paid, 
it is obvious that an alteration in the proportion 
between labour and capital might occasion a rise in 
the rate of profits without supposing any increase in 
the productive powers of labour. But all the causes 
just noticed are of a nature to increase the productive 
powers both of labour and capital ; and if in any case 
they are of sufficient force to overcome the effect of 
taking poorer land into cultivation, the rate of profits 
may rise consistently even with an increase in the 
real wages of labour. 



252 OF THE PROFITS OF CAPITAL. [CH. V. 

In the case in question, though it is generally sup- 
posed that the money wages of labour did not rise in 
proportion to the rise in the price of provisions ; vet 
1 cannot help thinking, both from the acknowledged 
demand for labour and the rapid increase of popula- 
tion, that, partly owing to parish assistance and the 
more extended use of potatoes, and partly to task- 
work and the increased employment of women and 
children, the labouring classes 'had on an average an 
increased command over the necessaries of life. I arti 
inclined to think, therefore, that the increased rate of 
profits from 1793 to 1813 did not arise so much from 
the diminished quantity of agricultural produce given 
to the labourer's family, as from the increase in the 
amount of agricultural produce obtained by the same 
number of families. As a matter of fact, I have no 
doubt that, as I stated in the chapter on rent, the capi- 
tal employed upon the last land taken into cultivation 
in 1813, was more productive than the capital employ- 
ed upon the last land taken into cultivation in 1727 ; 
and it appears to me that the causes which have been 
mentioned are sufficient to account for it theoretically, 
and to make such an event appear not only possible, 
but probable, and likely to be of frequent recur- 
rence. 

It will be said, perhaps, that some of the causes 
which have been noticed are in part accidental ; and 
that in contemplating a future period, we cannot lay 
our account to improvements in agriculture, and an 
increase of personal exertions in the labouring classes. 
This is in some degree true. At the same time it 
must be allowed that a great demand for corn of home 
growth must tend greatly to encourage improvements 
In agriculture, and a great demand for labour must 
stimulate the actual population to do more work; and 
when to these two circumstances we add the neces- 
sary effect of a rising price of corn owing to an 
increase of wealth, without a proportionate rise of 
other commodities, the probabilities of an increase in 



SEC. III.] OF THE PROFITS OF CAPITAL. 253 

the productive powers of labour sufficient to counter- 
balance the effect of taking additional land into culti- 
vation are so strong, that, in the actual state of most 
countries in the world, or in their probable state for 
some centuries to come, we may fairly lay our 
account to their operation when the occasion calls 
tor them. 

T should feel no doubt, for instance, of an increase 
in the rate of profits in this country for twenty years 
together at the beginning of the twentieth century, 
compared with the twenty years which are now com- 
ing on ; provided this near period were a period of 
profound tranquillity and peace and abundant capital, 
and the future period were a period in which capital 
was scanty in proportion to the demand for it owing 
to a war, attended by the circumstances of an increas- 
ing trade and an increasing demand for agricultural 

ESSaSSiiS those which vvere experienced 

But if this be so, it follows, that in the actual state 
of things in most countries of the world, and within 
limited periods of moderate extent, the rate of profits 
will practically depend more upon the causes which 
attect the relative abundance or scarcity of capital, 
than on the natural powers of the last land taken into 
cultivation. And consequently, to dwell on this 
latter point as the sole, or even the main cause which 
determines profits, must lead to the most erroneous 
conclusions. Adam Smith, in stating the cause of 
the fall of profits, has omitted this point, and in so 
doing has omitted a most important consideration ; 
but in dwelling solely upon the abundance and com- 
petition of capital, he is practically much nearer the 
■ruth, than those who dwell almost exclusively on 
the quality of the last land taken into cultivation. 

* Perhaps it oueht to be allowed that Adam Smith, in speaking of the effects of 
accumulation and competition on profits, naturally means Jrefer to a hnitedTerri- 
tory, a hmited population, and a limited demand; hut accumulation of caoltal 
under these crcimstances.involves every cause that can affect profits P 



254 OF THE PROFITS OF CAPITAL. [CH. V. 

SECTION IV. 

Remarks on Mr. Ricardoh Theory of Profits. 

According to Mr. Ricardo, profits are regulated by 
wages, and wages by the quality of the last land 
taken into cultivation. This theory of profits depends 
entirely upon the circumstance of the mass of commo- 
dities remaining at the same price, while money con- 
tinues of the same value, whatever may be the varia- 
tions in the price of labour. This uniformity in the 
value of wages and profits taken together is indeed 
assumed by Mr Ricardo in all his calculations, from 
one end of his work to the other ; and if it were true, 
we should certainly have an accurate rule which 
would determine the rate of profits upon any given 
rise or fall of money wages. But if it be not true, 
the whole theory falls to the ground. We can infer 
nothing respecting the rate of profits from a rise of 
money wages, if commodities, instead of remaining 
of the same price, are very variously affected, some 
rising, some falling, and a very small number indeed 
remaining stationary. But it was shewn in a former 
chapter* that this must necessarily take place upon a 
rise in the price of labour. Consequently the money 
wages of labour cannot regulate the rate of profits. 

This conclusion will appear still more strikingly 
true, if we adopt that supposition respecting the 
mode of procuring the precious metals, which would 
certainly maintain them most strictly of the same 
value, that is, if we suppose them to be procured by 
a uniform quantity of unassisted labour without any 
advances in the shape of capital beyond the necessa- 
ries of a single day. That the precious metals would 
in this case retain, more completely than in any other, 
the same value, cannot be denied, as they would both 

* Chap. ii. sects. 4 and r .. 



SEC. IV.] OF THE PROFITS OF CAPITAL. 255 

cost and command the same quantity of labour. 
Hut m this case, as was before stated, the money 
price of labour could never permanently rise. We 
cannot however for a moment imagine that this 
impossibility of a rise or fall in the money price of 
labour could in any respect impede or interrupt the 
natural career of profits. The continued accumula- 
tion of capital and increasing difficulty of procuring 
subsistence would unquestionably lower profits All 
commodities, in the production of which the same 
quantity of labour continued to be employed, but 
with the assistance of capitals of various kinds and 
amount, would fall in price, and just in proportion to 
the degree m which the price of the commodity had 
before been affected by profits ; and with regard to 
com, in the production of which more labour would 
be necessary, this article would rise in money price 
notwithstanding the capital used to produce it, just 
to that point which would so reduce corn wages as 
to render the population stationary ; and thus all the 
effects upon profits, attributed by Mr. Ricardo to a 
rise of money wages, would take place while money 
wages and the value of money remained precisely the 
same. 1 his supposition serves further to shew how 
very erroneous it must be to consider the fall of profits 
as synonimous with a rise of money wages, or to 
make the money price of labour the great regulator 
of the rate of profits. It is obvious that, in this case, 
profits can only be regulated by the principle of com- 
petition, or of demand and supply, which would 
determine the degree in which the prices of commo- 
dities would fall ; and their prices, compared with 
the uniform price of labour, would mainly regulate 
the rate of profits. & 

But Mr. Ricardo never contemplates the fall of 
prices as occasioning a fall of profits, although prac- 
tically in many cases, as well as on the pFecedine 
supposition, a fall of profits must be produced in this 



256 OF THE PROFITS OF CAPITAL. [CH. V, 

Let us suppose a prosperous commercial city, 
oreatly excelling in some manufactures, and purchas- 
ing all its corn abroad. At first, and perhaps for a 
considerable time, the prices of its manufactures in 
foreign markets might be such as, compared with the 
price of its imported corn, to yield high profits ; but, 
as capital continued to be accumulated and employed 
in larger quantities on the exportable manufactures, 
such manufactures, upon the principles of demand and 
supply, would in all probability fall in price. A lar- 
ger portion of them must then be exchanged for a 
given portion of corn, and profits would necessarily 
fall. It is true that, under these circumstances, the 
labouring manufacturer must do more work for his 
support, and Mr. Ricardo would say that this is the 
legitimate cause of the fall of profits. In this 1 am 
quite willing to agree with him ; but surely the speci- 
fic cause, in this case, of more work being necessary 
to earn the same quantity of corn, is the fall in the 
prices of the exportable manufactures with which it is 
purchased, and not a rise in the price of corn, which 
may remain exactly the same. The fall in these 
manufactures is the natural consequence of an in- 
crease of supply arising from an accumulation ol 
capital more rapid than the extension of demand for 
its products ; and that the fall of profits so occasioned 
depends entirely upon the principles of demand and 
supply will be acknowledged, if we acknowledge, as 
we certainly must do, that the opening a new market 
for the manufactures in question would at once put 
an end to the fall of profits. 

Upon the same principle, of considering the prices 
of commodities as constant, Mr. Ricardo is of opinion, 
that if the prices of our corn and labour were to fall, 
the profits of our foreign trade would rise in propor- 
tion. But what is it, I would ask, that is to fix the 
prices of commodities in foreign markets ?— not mere- 
ly the quantity of labour which has been employed 
upon them, because, as was noticed in a former chap- 



9EC. IV.] OF THE PROFITS OF CAPITAL. 257 

ter, commodities will be found selling at the same 
price in foreign markets, which have cost very dif- 
ferent quantities of labour. But if they are deter- 
mined, as they certainly are, both on an average and 
at the moment, by supply and demand, what is to 
prevent a much larger supply, occasioned by the com- 
petition of capital thrown out of employment, from 
rapidly lowering prices, and with them reducing the 
rate of profits ? 

If the price of corn during the last twenty-five 
years could have been kept at about fifty shillings the 
quarter, and the increasing capital of the country had 
chiefly been applied to the working up of exportable 
commodities for the purchase of foreign corn, I am 
strongly disposed to believe that the profits of stock 
would have been lower instead of higher. The mil- 
lions which have been employed in permanent agri- 
cultural improvements* have had no tendency what- 
ever to lower* profits ; but if, in conjunction with a 
large portion of the common capital employed in 
domestic agriculture, they had been added to the 
already large capitals applied to the working up of 
exportable commodities, I can scarcely feel a doubt 
that the foreign markets would have been more than 
fully supplied ; that the prices of commodities would 
have been such as to make the profits of stock quite 
low ;f and that there would have been both a greater 
mass of moveable capitals at a loss for employment, 
and a greater disposition in those capitals to emigrate 
than has actually taken place. 

Mr. Ricardo has never laid any stress upon the in- 
fluence of permanent improvements in agriculture on 

* The millions of capital which have been expended in draining and in the roads 
and canals for tne conveyance of agricultural products, have tended rat her to raise 

^SSpaKfa" - m,lhons and miilions may ^ be ™^ ^ < he 52 
chitfl? u ;f p [hTa5S 1 °[. manu ^ ure, i s ' w,,en ! hey caUfor in, p° ,ted c °«"« ii* 

cmeay or tne add tion,l demand for their g.-ods occasioned by the increased im- 

To : d a bv JK2Sr? °T the pr °^ i0US i,,C,east ^"PP'/which 1st be occa- 
busi'nes^ C ° mpetlUon of so mau y moie -Pit* ™d woSraen in the same line of 



258 OF THE PROFITS OF CAPITAL. [CH. V. 

the profits of stock, although it is one of the most 
important considerations in the whole compass of 
Political Economy, as such improvements unques- 
tionably open the largest arena for the employment 
of capital without a diminution of profits. He 
observes, that " however extensive a country may be, 
where the land is of a poor quality, and where the 
importation of food is prohibited, the most moderate 
accumulations of capital will be attended with great 
reductions in the rate of profits, and a rapid rise in 
rent ; and on the contrary, a small but fertile country, 
particularly if it freely permits the importation of 
food, may accumulate a large stock of capital, with- 
out any great diminution in the rate of profits, or 
any great increase in the rent of land."* 

Adverting to the known effects of permanent 
improvements on the land, I should have drawn an 
inference from these two cases precisely the le verse 
of that which Mr. Ricardo has drawn. # A very exten- 
sive territory, with the soil of a poor quality, yet all. 
or nearly all capable of cultivation, might, by conti- 
nued improvements in agriculture, admit of the em- 
ployment of a vast mass of capital for hundreds of 
years, with little or with no fall of profits ; while the 
small but fertile territory, being very soon filled with 
all the capital it' could employ on the land, would be 
obliged to employ its further accumulations in the 
purchase of corn with falling manufactures ; a state 
of things which might easily reduce profits to their 
lowest rate before one-third of the capital had been 
accumulated that had been accumulated in the for- 
mer case. 

A country, which accumulates faster than its 
neighbours, might for hundreds of years still keep up 
its rate of profits, if it were successful in making per- 
manent improvements on the land ; but, if with the 
same rapidity of accumulation it were to depend 
chiefly on imported corn, its profits could scarcely 

* Frioc. of Polit E. en. ch. vi. p. 133. 2d edi 



SEC. IV.] "of the profits of capital. 259 

fail to fall ; and the fall would probably be occasion- 
ed, not by a rise in the bullion price of corn in the 
ports of Europe, but by a fall in the bullion price of 
the exports with which the corn was purchased by 
the country in question. 

These statements appear to me to accord with 
the most correct theory of profits, and they certainly 
seem to be confirmed by experience. I have already 
adverted to the unquestionable fact of the profits on 
land being higher in 181 3 than they were above eighty 
years before, although in the interval millions and mil- 
lions of accumulated capital had been employed on the 
soil. And the effect of falling prices in reducing profits 
is but too evident at the present moment. In the largest 
article of our exports, the wages of labour are now 
lower than they probably would be in an ordinary state 
of things if corn were at fifty shillings a quarter. 
If, according to the new theory of profits, the prices 
of our exports had remained the same, the master 
manufacturers would have been in a state of the 
most extraordinary prosperity, and the rapid accu- 
mulation of their capitals would soon have employed 
all the workmen that could have been found. But, 
instead of this, we hear of glutted markets, falling 
prices, and cotton goods selling at Kamschatka lower 
than the costs of production. 

It may be said, perhaps, that the cotton trade 
happens to be glutted ; and it is a tenet of the new 
doctrine on profits and demand, that if one trade be 
overstocked with capital, it is a certain sign that 
some other trade is understocked. But where, 1 
would ask, is there any considerable trade that is 
confessedly understocked, and where high profits have 
been long pleading in vain for additional capital? 
The war has now been at an end above four years ; 
and though the removal of capital generally occasions 
some partial loss, yet it is seldom long in taking 
place, if it be tempted to remove by great demand 
and high profits ; but if it be only discouraged from 



260 OF TH£ PROFITS OF CAPITAL. [CH. V. 

proceeding in its accustomed course by falling profits, 
while the profits in all other trades, owing to general 
low prices, are falling at the same time, though not 
perhaps precisely in the same degree, it is highly 
probable that its motions will be slow and hesi- 
tating. 

It must be allowed then, that in contemplating 
the altered relation between labour and the produce 
obtained by it which occasions a fall of profits, we 
only take a view of half the question if we advert 
exclusively to a rise in the wages of labour without 
referring to a fall in the prices of commodities. — 
Their effects on profits may be precisely the same ; 
but the latter case, where there is no question re- 
specting the state of the land, shews at once how 
much profits depend upon the prices of commodities, 
and upon the cause which determines these prices, 
namely the supply compared with the demand. 

At all times indeed, and on every supposition, the 
great limiting principle which depends upon the in- 
creasing difficulty of procuring food from the soil, or 
on the still more general cause, a limitation of the 
population, in whatever way it may be occasioned, is 
ready to act ; and, if not overcome by countervailing 
facilities, will necessarily lower the rate of profits on 
the land, and from the land this fall will extend to 
all other departments of industry. But even this 
great principle operates according to the laws of de- 
mand and supply and competition. 

The specific reason why profits must fall as the 
land becomes more and more exhausted is, that from 
the intrinsic nature of necessaries, and of the soil 
from which they are procured, the demand for them 
and the price of them cannot possibly go on increas- 
ing in proportion to the expense of producing them. 
The cost in labour of producing capital increases 
faster than the value of such capital when produced, 
or its efficiency in setting fresh labourers to work. 
The boundary to the further value of and demand for 



SEC. IV.] OF THE PROFITS OF CAPITAL. 261 

corn, lies clear and distinct before us. Putting im- 
portation out of the question, it is precisely when the 
produce of the last land taken into cultivation will 
but just replace the capital and support the population 
employed in cultivating it. Profits must then be at 
their lowest theoretical limit. In their progress 
towards this point, the continued accumulation of 
capital will always have a tendency to lower them • 
and at no one period can they ever be higher than 
the state of the land, under all the circumstances, 
will admit. 

They may be lower, however, as was before stated, 
in any degree, from an abundant supply of capital 
compared with the demand for produce ; and practi- 
cally they are very rarely so high as the actual state 
ot the land combined with the smallest possible 
quantity of food awarded to the labourer would admit 
of. But what would be the effects upon the profits 
of stock of any given increase of capital, or even of 
any given increase of the labour necessary to pro- 
duce a certain quantity of corn, it would be quite 
impossible to say before hand. 

In the case of a mere increase of capital, however 
large, it has appeared that circumstances might occur 
to prevent any fall of profits for a great length of 
time. And, even in the case of an increase in the 
quantity of labour necessary to produce corn, it would 
depend entirely upon the principles of demand and 
supply and competition, whether the increase in the 
price of corn would be such as to throw almost the 
whole ot the increased difficulty of production upon 
labour, or such as to throw almost the whole of it 
upon profits, or finally such as to divide the loss more 
equally in various proportions between them. 

No theory of profits therefore can approach towards 
correctness, which attempts to get rid of the principle 
ot demand and supply and competition. 



( 262 ) 



CHAPTER VI. 



OF THE DISTINCTION BETWEEN WEALTH AND VALUE. 

It has been justly stated by Adam Smith, that a man 
is rich or poor according to the degree in which he 
can afford to enjoy the necessaries, conveniences, and 
amusements of human life. And it follows from 
this definition that, if the bounty of nature furnished 
all the necessaries, conveniences and amusements of 
life to every inhabitant of a country in the fullest 
measure of proportion to his wishes, such a country 
would be in the highest degree wealthy, without pos- 
sessing any thing which would have exchangeable 
value, or could command a single hour's labour. 

In this state of things, undoubtedly, wealth has 
nothing to do with exchangeable value. But as this 
is not the actual state of things, nor likely to be so 
at any future time ; as the bounty of nature furnishes 
but few of the necessaries, conveniences and amuse- 
ments of life to man without the aid of his own exer- 
tions ; and as the great stimulus to exertion is the 
desire to possess what can only be possessed by 
means of some labour or sacrifice, it will be found 
that in the real state in which man is placed on earth, 
wealth and exchangeable value, though still by no 
means the same, are much more nearly connected 
than they have sometimes been supposed to be. 

In considering the different quantities of the same 
commodity which, under different circumstances, 
have the same exchangeable value, the distinction is 
indeed perfectly obvious. Stockings do not lose hall 
their power of contributing to the comfort and con- 
venience of the wearer, because by improved machi- 



CH. VI.] WEALTH AND VALUE. 



nery they can be made at half the price, or their 
exchangeable value be reduced one half. It will be 
readily allowed that the man who has two pairs of 
stockings of the same quality instead of one pair 
possesses, as far as stockings are concerned, a double 
portion of the conveniences of life. 

Yet even in this case he is not in all resnects 
doubly rich. If, indeed, he means to use them him- 
self, he really has twice as much wealth, but if he 
means to exchange them for other commodities, he 
has not ; as one pair of stockings, under certain cir- 
cumstances, may command more labour and other 
commodities than even two or even three pairs after 
very great improvements have been made in the 
machinery used in producing them. In all cases 
however of this description, the nature of the diffe 

marked eU WCalth Md Val " e ' S sufficie "tly 

But when we come to compare objects of different 
kinds, there ,s no other way of estimating the degree 
of wealth which the possession and enjoymenF of 
hem confer on the owner, than by the relative esti- 
ma on m which they are respectively held, evinced 
by their relative exchangeable values. If one mm 
has a certain quantity of tobacco, and another a cer- 
tain quantity of muslin, we can only determine which 
ot the tvvo is the richer by ascertaining their relative 
command of wealth in the market. And even if one 
country exports corn, and imports lace and cambrics 
notwithstanding that corn has a more marked and 
definite value in use than any other commodity t e 
estimate must be formed exactly in the amewav! 
Luxuries are a part of wealth, as well as necessaries 

It ZTJ W ° U V d n0t haVC received ,ace aild cam- 
brics in exchange for its corn, unless its wealth, or its 

necessaries, conveniences and luxuries taken together 

had been increased by such exchange ; and this in 

c ease of wealth cannot possibly be & measured in any 

other way than by the increase of value so occasioned 



264 OF THE DISTINCTION BETWEEN [cH. VI. 

founded upon the circumstance that the commodities 
received are more wanted and held in higher estima- 
tion than those which were sent away. 

Wealth, however, it will be allowed, does not 
always increase in proportion to the increase of value ; 
because an increase of value may sometimes take 
place under an actual diminution of the necessaries, 
conveniences and luxuries of life ; but neither does it 
increase in proportion to the mere quantity of what 
comes under the denomination of wealth, because the 
various articles of which this quantity is composed 
may not be so proportioned to the wants and powers 
of the society as to give them their proper value. 
The most useful commodity, in respect of its quali- 
ties, if it be absolutely in excess, not only loses its 
exchangeable value, but its power of supplying the 
wants of the society to the extent of its quantity, and 
part of it therefore loses its quality of wealth. If the 
roads and canals of England were suddenly broken 
up and destroyed, so as to prevent all passage and 
interchange of goods, there would at first be no dimi- 
nution of commodities, but there would be immedi- 
ately a most alarming diminution both of value and 
wealth. A great quantity of goods would at once 
lose their value by becoming utterly useless; and 
though others would rise in particular places, yet from 
the general want of power to purchase, the rise would 
by no means compensate for the fall. The whole 
exchangeable value of the produce estimated in 
labour, corn, or money, would be greatly diminished ; 
and it is quite obvious that the wealth of the society 
would be most essentially impaired ; that is, its wants 
would not be in any degree so well supplied as be- 
fore. 

It appears then that the wealth of a country de- 
pends partly upon the quantity of produce obtained 
by its labour, and partly upon such an adaptation of 
it to the wants and powers of the existing population 
as is calculated to give it value. 



H< V,, J WEALTH AND VALUE. 



266 



But where wealth and value are perhaps the most 
nearly connected, is in the constant necessity of the 
latter to the production of the former. In the actual 
state of things, no considerable quantity of wealth can 
be obtained except by considerable exertions ; and 
unless the value which an individual or the society 
places on the object when obtained fully compensates 
.be sacrifice which has been made to obtain it, such 
wealth will not be produced in future. If labour 
alone be concerned in its production, as in shrimping, 
in the collection of hips and wild strawberries, and 
some other exertions of mere manual labour, it is 
obvious that this wealth will not be collected, will not 
be used to supply any of the wants of the society, 
unless its value when collected will, at the least, com- 
mand as much labour as the collection of it cost 

If the nature of the object to be obtained requires 
advances in the shape of capital, as in the vast majori- 
ty of instances, then by whomsoever this capital is 
furnished, whether by the labourers themselves or by 
otliers, the commodity will not be produced, unless 
the estimation m which it is held by the society or its 
value in exchange be such, as not only to replace all 
the advances of labour and other articles which have 
been made for its attainment, but to pay the usual 
profits of capital. 

It is obviously therefore the value of commodities 
or the sacrifice of labour and of other articles which 
people are willing to make in order to obtain them 
that in the actual state of things may be said to be the 
sole cause of the existence of wealth ; and this value 
is founded on the wants of mankind, and the adapta- 
tion of particular commodities to supply these wants, 
independently of the actual quantity of labour which 
these commodities may cost in their collection or pro- 
duction. It is this value which is not only the great ' 
stimulus to the production of all kinds of wealth? but 
the great regulator of the forms and relative quantities 
in which it shall exist. No species of wealth can be 

34 



266 OF THE DISTINCTION BETWEEN [CH. VI- 

brought to market for a continuance, unless some part 
of the society sets a value upon it equal to its natural 
or necessary price, and is both able and willing to 
make a sacrifice to this extent in order to obtain it. 
A tax will entirely put an end to the production of a 
commodity, if no one of the society is disposed to 
value it at a price equal to the new conditions of its 
supply. And on the other hand, commodities will be 
continually increased in quantity so long as the num- 
bers of those, who are able and willing to give a value 
for them equal to this price, continue to increase. 

In short, the market prices of commodities are the 
irr mediate causes of all the great movements of society 
in the production of wealth, and these market prices 
always express clearly and unequivocally the ex- 
changeable value of commodities at the time and place 
in which they are exchanged, and differ only from 
natural and necessary prices as the actual state of the 
demand and supply, with regard to any particular 
article, may differ from the ordinary and average state. 
The reader of course will observe, that in using the 
term value, or value in exchange, I always mean it to 
be understood in that enlarged and, as I conceive, 
accustomed and correct sense, according to which I 
endeavoured to explain and define it in the Second 
Chapter of this work, and never in the confined sense 
in which it has been lately applied by Mr. Ricardo, as 
depending exclusively upon the actual quantity of 
labour employed in production.* Understood in this 
latter sense, value, certainly, has not so intimate a 
connection with wealth. In comparing two countries 
together of different degrees of fertility, or in compar- 
ing an agricultural with a manufacturing and com- 

* Mr. Ricardo says, (ch. xx. p. 343.) " That commodity is alone invariable, 
which at all times requires the same sacrifice of toil and labour to produce it." 
What does the term •' invariable" mean here ? It cannot mean invariable in its 
exchangeable value ; because Mr. Ricardo has himself allowed that commodities 
which have cost the same sacrifice of toil and labour will very frequently not 
exchange for each other. As a measure of value in exchange, this standard is much 
more variable than those which he has rejected ; and in what other sense it is to be 
understood, it is not easy to say. 



CH# VL ] WEALTH AND VALUE. 267 

mercial country, their relative wealth would be very 
different from the proportion of labour employed by 
each in production ; and certainly the increasing 
quantity of labour necessary to produce any commo- 
dity would be very far indeed from being a stimulus 
to its increase. In this sense therefore wealth and 
value are very different. 

tfut if value be understood in the sense in which it 
is most generally used, and according to which I have 
defined it, wealth and value, though certainly not 
always the same, will appear to be very nearly con- 
nected ; and in making an estimate of wealth, it must 
be allowed to be as grave an error to consider quantity 
without reference to value, as to consider value with- 
out reference to quantity. 



( 268 ) 



CHAPTER VII. 



ON THK IMMEDIATE CAUSK'S OF THE PRCGKKSS OF 

WEALTH. 



SECTION I. 



Statement of the particular Object of Inquiry. 

There is scarcely any inquiry more curious, or from 
its importance, more worthy of attention, than that 
which traces the causes which practically check the 
progress of wealth in different countries, and stop it. 
or make it proceed very slowly, while the power of 
production remains comparatively undiminished, or 
at least would furnish the means of a great and 
abundant increase of produce and population. 

In a former work* I endeavoured to trace the 
causes which practically keep down the population 
of a country to the level of its actual supplies. It is 
now my object to shew what are the causes which 
chiefly influence these supplies, or call the powers 
of production forth into the shape of increasing 

wealth. 

Among the primary and most important causes 
which influence the wealth of nations, must unques- 
tionably be placed, those which come under the head 
of politics and morals. Security of property, without 
a certain degree of which, there can be no encour- 
agement to individual industry, depends mainly upon 
the political constitution of a country, the excellence 

* Essay on the Principle of Population. 



SEC. I.] OF THE PROGRESS OF WEALTH. 269 

of its laws and the manner in which they are admin- 
istered. And tho abits which are the most favour • 
able to regular e? as well as to general rectitude 

of character, a. „ -quently most favourable 

to the production and m, anee'of wealth, depend 
chiefly upon the same ca s, combined with moral 
and religious instruction. It is not however my 
intention at present to enUr fully into these causes, 
important and effect ye as t Ley are; but to confine 
myself chiefly to the more immediate and proximal- 
causes of increasing wealth, whether they may have 
their origin in these political and moraJ sources, or in 
any others 'more specifically and directly within the 
province of political economy. 

It is obviously true that there are many countries, 
not essentially different either in the der -ee of security 
which they afford to property, or in ' e moral and 
religious instruction received by the x >ople, which 
yet, with nearly equal natural capabilities, make a 
very different progress in wealth. It is the principal 
object of the present inquiry to explain this : «d to 
furnish some solution of certain phenomena frequeutfy 
obtruded upon our attention, whenever we take a 
view of the different states of Europe, or of the 
world ; namely, countries with great powers of pro- 
duction comparatively poor, and countres with small 
powers of production comparatively rich. 

If the actual riches of a country not subject to rt 
peated violences and a frequent destruction of prr 
duce, be not after a certain period in some deg 
proportioned to its power of producing riches, 
deficiency must have arisen from the want 
adequate stimulus to continued production, 
practical question then for our considerate 
are the most immediate and effective stimm. 
continued creation and progress of wealth. 



270 ON THE IMMEDIATE CAJSES [CH. VII. 



SECTION 1 

Of the Increase of Populat' as a Stimulus t 

the continuec «se of w ealth. 

Many writers have been t opinion that an increase 
of population is the so e stimulus necessary to the 
increase of wealth, because L jpulation, being the 
great swiee of cons: mption/must in their opinion 
necessarily ke^p up the demand for an increase of 
produce, which will naturally be followed by a con- 
tinued increase of supply* 

That a permanent increase of population is a pow- 
erful and necessary element of increasing demand, 
will be most ~eadily allowed ; but that the increase 
of populatior alone, or, more properly speaking, the 
pressure of t population hard against the limits of 
subsistence, does not furnish an effective stimulus to 
the continued increase of wealth, is not only evident 
in theory, but is confirmed by universal experience. 
If ■: alone, or the desire of the labouring classes 

to possess the necessaries and conveniences of life, 
were a sufficient stimulus to production, there is no 
state in Europe, or in the world, that would have 
found any other practical limit to its w r ealth than its 
Dower to pivsduce ; and the earth would probably 
efore this period have contained, at the very least, 
^n times as many inhabitants as are supported on its 
'•face at present. 

^ut those who are acquainted with the nature of 

ive demand, will be fully aware that, where 

rht of private f/iopeity is established, and the 

~> f " . ty are supplied by industry and barter, 

any individual to possess the necessary 

oes and luxuries of life, however intense, 

.vail nothing towards their production, if there 

je no where a reciprocal demand for something which 

he possesses. A man whose only possession is his 



SEC. II.] 



PROGRESS OF WEALTH. 



271 



an effective demand for produce 

u* is, or is not, in demand by 

disposal of produce. And no 

er be in demand unless the 

* of greater value than the 

No fresh bands . be 

dustry merely in conse- 

produce occasioned by 

farmer will take the 

bour of ten additional 

iroduce will then sell 

^ just equal to what 

is. There must be 

the demand and 

or in its price. 



labour, has, or h?> 

according as his 

those who ha^ 

productive laboi 

produce when o» 

labour which obt, 

employed in an} 

quence of the den. 

the persons employei 

trouble of superintends 

men merely because his 

in the market at an advan* 

he had paid his additional A 

something in the previous . 

supply of the commodity in c 

antecedent to and independent, 

sioned by the new labourers, in 

employment of an additional nun 

production. 

It will be said perhaps, that the n 
lation will lower wages, a> d, by thus . 

sts of production, will crease the 
capitalists and the encouragement to 
temporary effect of this kind may 
place, but it is evidently very. F y tly 
fall of wages cannot go o~ b '■"-» 

without not only stoppir 

ition but making it even retrogiL 
point is reached, it will probabl) 
increase of produce occasioned by the 
additional number of persons will haw 
its value, as more than to counterbalance 
wages, and thus to diminish instead of inerv 
profits of the capitalists and the power and v 
employ more laf jfe 

It is obvious vla0 ii in theory, that an increase 
population, when an additional quantity of labour 
not wanted, will soon be checked by want of employ- 
ment, and the scanty support of those employee?, and 



demand occa- 

warrant the 

eople in its 

popu- 

ling the 

of the 

Some 

take 

The 

>int 

l- 

s 



d 



ui 



ON THE IMMEDIATE < [CH. VII. 

will not furnish the required stir/ s to an increase 
of wealth proportioned to the pr »f production. 

But, if any doubts should re with respect to 

the theory on the subject, thc^ ely be dissipat- 

ed by a reference to experii * scarcely possi- 

ble to cast ouv eyes on any i the world with- 

out seeing a striking conf f what has been 

advanced." Almost univ actual wealth of 

all the states with whir e acquainted is very 

far short t>f their pow roduction ; and almost 

universally among thr s, the slowest progress 

in wealth is made lie stimulus arising from 

population alone is eatest, that is, where the 

population presse ardest against the limits of 

subsistence. It 3 evident that the .only fair 

ty, indeed th ./ay, by which we can judge 

practic - of population alone as a stimu- 

lus to weal*' &fer to those countries where, from 

the exce iation above the funds applied to 

the mai of labour, the stimujus of want is 

the grea uid if in t l ^ese countries, which still 

have gr .vers of pi ^ action, the progress of 

wealth v >w, we nave certainly all the evi- 

dence ^erience can possibly give us, that 

popr ne t not create an effective demand 

for 

1 permanent increase of 

p 5 the question. We may as well 

i a increase of ^wealth , because an 

; manent increase of population cannot 

ta .thout a proportionate or nearly propor- 

crease of wealth. The question really is, 

encouragements to population, or even the 

a tendency of population to increase beyond 

Kinds for its maintenanc 3 to press hard 

gainst the limits of subsistence, ..ill, or will not, 

alone furnish an adequate stimulus to the increase of 

Y*"alth. And this question, Spain, P )rtugal, Poland, 

Hungary, Turkey, and many other countries in 



BC III.] OF THE PROGRESS OF WEALTH. 273 

Europe, together with nearly the w\o\e of Asia and 
Africa, and the greatest part of t -erica, distinctly 
answer in the negative. 



SECTION IN. 

Of Accumulation, or the Saving from Revenue to add to 
Capital, considered as a Stimulus to the Increcse of 
Wealth. J 

■ 

Those who reject mere population as an adequate 
stimulus to the increase of wealth, are generally dis- 
posed to mr- p^rv tbins deoead upon accumula- 
tion. It 1? , permanent and con- 

contn mC dke pIace wkhout a 

With md J CI ? nn0t v '^ ree 

c? 



p 



labour ; a 



r words, 



iat wincn is to 
ne conversion of 



quire what is the state of things 

es a nation to accumulate ; and 

late of things which tends to 

on the most effective, and lead 

ntinued increase of capital and 

possible by parsimony to devote 
3 er share than usual ofthe produce 

the maintenance of productive 
quite true that the labourers so 



and o"^ T tb r l 2t ° p n fi'tra- ft l ;tz if ; t( ? tiie Ndti,rc 

have zone as ma r L J ' P . L ° rd L ,,,de,daJe spears to 

reco^endlr 12 de P recat,n S •«un W Jatk>n 1 as some other liters m 

.oTcTof erro? £ p umu .tSZ? ^^ ' ™* "*« ' COnSider ** **«"" 

35 



274 ON THE IMMEDIATE CA [CH. Vlf. 

employed are r nsumers as well as unproductive 
labourers ; air 1 s far as the labourers are concerned, 
there would be no diminution of consumption or 
demand. But it has already been shewn that the con- 
r sumption am demand occasioned by the persons em- 
ployed in productive labour can never alone furnish a 
motive to the accumulation and employment of capital ; 
* and with regard to the capitalists themselves, together 
with the landlords and other rich persons, they have, 
by the supposition, agreed to he parsimonious, and by 
depriving themselves of their usual conveniences and 
luxuries to save °rom their revenue and add to their 
capital Under tl -,se circumstances, 1 would ask, how 
it is possible to suppose that the increased quantity of 
commodities, obtairedby the increased number of pro- 
ductive labourers, shv > % * *- * -knout such 
a fall of price as wou* alue below 

the costs of product v ' ** tJ ) 

diminish both the pov . 



^_ 



ties in general , Jse, au 

the subject, comn dities bein 
commodities, one half will li 
other half, raid production beii 
of demand, an excess in the 
merely proves a deficiency in 
other, and a general excess is i 
in his distinguished work on pc 
indeed gone so far as to state tha 
a commodity by taking it out of t 
es demand, and the production oi 
portionably increases it. 

This doctrine, however, to the < which i\ 

has been applied, appears to me io b< unfound- 

ed, and completely to contradict tin principles 

which regulate supply and demand. 

It is by no means true, as a matter of fact, that 
commodities are always exchanged for commodities 



C. III.] OF THE PROGRESS WEALTH. 275 

The great mass of commodities is exchanged directly 
for labour, either productive or unproductive ; and it 
is quite obvious that this mass of commodities, com- 
pared with the labour with which it is to be exchang- 
ed, may fall in value from a glut, just as any one com- 
modity fall: in ,alue from an excess of supply, com- 
pared either with labour or money. 

In the case supposed there would evidently be an 
unusal quantity of commodities of all kinds in the 
market, owing to the unproductive labourers of the 
country having been converted, by the accumulation 
of capital, into productive labourers ; while the num- 
ber of labourers altogether being the same, and the 
power and will to purchase for consumption among 
landlords and capitalists being by supposition dimin- 
ished, commodities would necessarily fall in value, 
cr mpared with labour, so as to lower profits almost 
to mthing, and to check for a time further production. 
Bu this is precisely what is meant by the term glut, 
wl ch, in this case, is evidently general not partial. 

I. Say, Mr. Mill,* and Mr. Hicardo, the principal 
au lors of the new doctrines on profits, appear to me 
to have fallen into some fundamental errors in the view 
which they have taken of this subject. 

In the first place, they have considered commodi- 
ties as if they were so many mathematical figures, or 
arithmetical characters, the relations of which were to 
be compared, instead of articles of consumption, which 
must of course be referred to the numbers and wants of 
the consumers. 

If commodities were only to be compared and 
exchanged with each other, then indeed it would be 
true that, if they were all increased in their proper pro- 
portions to any extent, they would continue to bear 

U^J?v'th 1 l 1, » 1 i.» inar r, plyt0 Mr \ > enn? ' H'lfcbed in 1803, Las laid down very 
,™ hVf o ! ih^™ 6 ^r^'f* ar * ™l7 Purchased by 'com modi. ies, and tS 

one ha.f oi them must always famuli a market for the other half. The same dor 

SK^f^' 1 »H. *.n»t ^tem by the authorof an able * £*£ 

^^tejyiasK to t,,e EncWia Bnt3nni, ' a ' whi 



276 ON THE IMMEDIATE CAUSES [CH VII. 



among themselves the same relative value ; but, if Ave 
compare them, as we certainly ought to do, with tlv 
numbers and wants of the consumers, then a great 
increase of produce with comparatively stationary 
numbers and with wants diminished by parsimony, 
must necessarily occasion a great fall 01 v .ue estimat- 
ed in labour, so that the same produce, though it 
might have cost the same quantity of labour as before, 
would no longer command the same quantity ; and 
both the power of accumulation and the motive to 
accumulate would be strongly checked. 

It is asserted that effectual demand is nothing more 
than the offering of one commodity in exchange for 
another. But is this all that is necessary to effectual 
demand ? Though each commodity may have cost 
the same quantity of labour and capital in its produc- 
tion, and they may be exactly equivalent to each ot - 
er in exchange, yet why may not both be so plenti al 
as not to command more labour, or but very li tie 
more than they have cost ; and in this case, would le 
demand for them be effectual ? Would it be such as 
to encourage their continued production ? Unques- 
tionably not. Their relation to each other may not 
have changed ; but their relation to the wants of the 
society, their relation to bullion, and their relation to 
domestic and foreign labour, may have experienced a 
most important change. 

It will be readily allowed that a new commodity 
thrown into the market, which, in proportion to the 
labour employed upon it, is of higher exchangeable 
value than usual, is precisely calculated to increase 
demand ; because it implies, not a mere increase of 
quantity, but a better adaptation of the produce to 
the tastes, wants and consumption of the society. But 
to fabricate or procure commodities of this kind is the 
grand difficulty ; and they certainly do not naturally 
and necessarily follow an accumulation of capital and 
increase of commodities, most particularly when such 
accumulation and increase have been occasioned by 



III.] OF THE PROGRESS OF WEALTH. 27? 

economy of consumption, or a discouragement to the 
indulgence of those tastes and wants, which are the 
very elements of demand. 

Sir. Ricardo, though he maintains as a general 
position that capital cannot be redundant, is obliged 
to make the following concession. He says, " There 
is only one case, and that will be temporary, in which 
the accumulation of capital with a low price of food 
may be attended with a fall of profits ; and that is, 
when the funds for the maintenance of labour increase 
much more rapidly than population ; — wages will then 
be high and profits low. If every man were to 
forego the use of luxuries and be intent only on ac- 
cumulation, a quantity of necessaries might be pro- 
duced for which there could not be any immediate 
consumption. Of commodities so limited in number, 
there might undoubtedly be an universal glut ; and 
cons quently there might neither be demand for an 
addi ional quantity of such commodities, nor profits 
on <ne employment of more capital. If men ceased 
to consume, they would cease to produce." Mr. 
Ricardo then adds, " This admission does not impugn 
che general principle."* In this remark I cannot 
quite agree with him. As, from the nature of 
population, an increase of labourers cannot be brought 
into the market, in consequence of a particular 
demand, till after the lapse of sixteen or eighteen 
years, and the conversion of revenue into capital 
may take place much more rapidly; a country is 
always liable to an increase of the funds for the 
maintenance of labour faster than the increase of 
population. But if, whenever this occurs, there may 
be a universal glut of commodities, how can it be 
maintained, as a general position, that capital is 
never redundant ; and that because commodities may 
retain the same relative values, a glut can only be 
partial, not general ? 

PrincofFnlit. Ecofl cb. wi. p 3fM.2ded; 



278 O.N THE IMMEDIATE CAUSES [CH. \Vn. 

Another fundamental error into which the write 
above-mentioned and their followers appear to have 
fallen is, the not taking into consideration the influ- 
ence of so general and important a principle in human 
nature, as indolence or the love of ease. 

It has been supposed* that, if a certain number of 
farmers and a certain number of manufacturers had 
been exchanging their surplus food and clothing with 
each other, and their powers of production were sud- 
denly so increased that both parties could, with the 
same labour, produce luxuries in addition to what 
they had before obtained, there could be no sort of 
difficulty with regard to demand, as part of the 
luxuries which the farmer produced would be ex- 
changed against part of the luxuries produced by the 
manufacturer; and the only result would be, the 
happy one of both parties being better supplied and 
having more enjoyments. 

But in this intercourse of mutual gratificat ons, 
two things are taken for granted, which are the . ery 
points in dispute. It is taken for granted that luxu- 
ries are always preferred to indolence, and that the 
profits of each party are consumed as revenue. What 
would be the effect of a desire to save under such 
circumstances, shall be considered presently. The 
effect of a preference of indolence to luxuries would 
evidently be to occasion a want of demand for the 
returns of the increased powers of production sup- 
posed, and to throw labourers out of employment. 
The cultivator, being now enabled to obtain the 
necessaries and conveniencies to which he had been 
accustomed, with less toil and trouble, and his tastes 
for ribbands, lace and velvet not being fully formed, 
might be verv likely to indulge himself m indolence, 
and employ less labour on the land ; while the manu- 
facturer, finding his velvets rather heavy of sale, 
would be led to discontinue their manufacture, and to 

* I :h Review, No. LXIV. p. 471.' 



C. III.] OF THE PROGRESS OF WEALTH. 2] 

fall almost necessarily into the same indolent system 
the farmer. That an efficient taste for luxuries, 
that is, such a taste as will properly stimulate indus- 
v, instead of being ready to appear at the moment 
is required, is a plant of slow growth, the history 
human society sufficiently shews ; and that it is a 
most important error to take for granted, that mankind 
will produce and consume all that they have the 
power to produce and consume, and will never prefer 
indolence to the rewards of industry, will sufficiently 
appear from a slight review of some of the nations 
with which we are acquainted. But I shall have oc- 
casion for a review of this kind in the next section ; 
and to this I refer the reader. 

A third very serious error of writers rbov«? referred 
to, and practically the most important of the three, 
consists in supposing that accumulation ensures de- 
mand ; or that the consumption of the labourers em- 
ployed by those whose object is to save, will create 
such an effectual demand for commodities as to en- 
courage a continued increase of produce. 

Mr. Ricardo observes, that " If 10,000/. were given 
to a man having 100,000/. per annum, he would not 
lock it up in a chest, but would either increase his 
expenses by 10,000/., employ it himself productively 
or lend it to some other person for that purpose ; in 
her case demand would be increased, although i< 
would be for different objects. If he increased h: 
expenses, his effectual den and might probably be for 
buildings, furniture, or s me such enjoyment. If 
he employed his 10,000/. oductivelv, his effectual 
demand would be for food, 'othing, and raw mate- 
rials, which might set new .abourers to work. But 
still it would be demand.' 

Upon this principle it is supposed that if the richer 
portion of society were to forego their accustomed 
conveniences and luxuries with a view to accumula- 

* Princ. of Polit. Ecoo. chap. xxi. p. 3^1. 2d edi*. 






JO ON THE IMMEDIATE CAUSES [CH. VII. 

tion, the only effect would be a direction of nearly 
the whole capital of the country to the production of 
necessaries, which would lead to a great increase of 
cultivation and population. But, without supposing 
an entire change in the usual motives to accumula- 
tion, this could not possibly happen. The usual 
motives for accumulation are, I conceive, either the 
future wealth and enjoyment of the individual who 
accumulates, or of those to whom he means to leave 
his property. Ana with these motives it could never 
answer to the possessor of land to employ nearly all 
the labour which the soil could support in cultiva- 
tion ; as by so doing he would necessarily destroy his 
neat rent, and render it impossible for him, without 
subsequently dismissing the greatest part of his work- 
irt9ii and occasioning the most dreadful distress, either 
to give himself the means of greater enjoyment at a 
future distant period, or to transmit such means to his 
posterity. 

The very definition of fertile land is, land that will 
support a much greater number of persons than are 
necessary to cultivate it ; and if the landlord, instead 
of spending this surplus in conveniences, luxuries and 
unproductive consumers, were to employ it in setting 
to work on the land as many labourers as his savings 
could support, it is quite obvious that, instead of 
being enriched, he would be impoverished by such a 
proceeding, both at first and in future. Nothing 
could justify such a cone net but a different motive 
for accumulation ; that ii a desire to increase the 
population — not the lovr )f wealth and enjoyment ; 
and till such a change t< s place in the passions and 
propensities of mankind, we may be quite sure that 
the landlords and cultivators will not go on employ- 
ing labourers in this way. 

What then would happen ? As soon as the land- 
lords and cultivators found that they could not realize 
their increasing produce in some way which Vould 
give them a command of wealth in future, they would 



JEC. HI.] OF THE PROGRESS OF WEALTH. 281 

cease to employ more labour upon the land:* and if 
the business of that part of the society which was not 
engaged in raising raw produce, consisted merely in 
preparing the other simple necessaries of life/the 
number required for this purpose being inconsidera- 
ble, the rest of those whom the soil could support 
would be thrown out of work. Having no means of 
legally demanding a portion of the raw produce, 
however plentiful ,t might be at first, they would 
gradually decrease ,n numbers ; and the failure of 
effect! ve demand for the produce of the soil would 
necessarily diminish cultivation, and throw a still 
greater number of persons out of employment. This 
action and reaction would thus go on till the balance 
of produce and consumption was restored in reference 
to the new tastes and habits which were established ; 
and it is obvious that without an expenditure which 
will encourage commerce, manufactures, and unpro- 

chT.l f r SUH T' or an Agrarian law calculated to 
change the usual motives for accumulation, the pos- 

c„b,°v r l T d T uld have "° sufficient st '™l"s to 

KadTpnT ; an , a °T try SUch as our «™> which 
had been rich and populous, would, with such parsi- 

~^« fallib,? b ° co,m **> - «£ 

The same kind of reasoning will obviously apply 
to the case noticed before. While the farmers were 
disposed to consume the luxuries produced by the 
manufacturers, and the manufacturers those produced 

consignation in their re?son^ It P P i f" t0 ° apt t0 throw h out of their 
ties, not money. But i^S n, ^n abstract truth that we want commodi- 
?oods at o.,ce, can b a Xa 1 "2 T? F f ° r . wh \ ch h is P^ible to sell our 
"* in the same manner to proSo J?; 2 \T *?* * T Ulati " g medium, and enable 
labour and provisions a year or t ' "' tf> P l, r ch * se :in ^tate, or to command 

necessary to any wide^M* miX? ^T V"' c, ' lati "S -nedion, is absolutely 
slowly, if he were M^^J^*^^""™^™.™** get on but 
cannot therefore be surprized a Ti''-n' aU the ? ages of his workmen. We 

in civilized countries w 1 hi • " g , ai0r ? ey ra,her than other ^ods : and 
not sell his prod ct's so a, "n^iveT 6 ^ J ,at i fthe farme '' or ™nufacturer car,: 
^^^^h^^^^^^J^ est.mated in money, his industry will 
tnbution of wealth and t£ L " medlUm bears so important a part in the dis- 

reasonings may often 1^ ! us ST/**'™" ° f Wb ^' ^ to *' E «* In our 



282 ON THE IMMEDIATE CAUSES [CH. \TI> 

by the farmers, all would go on smoothly ; but if 
either one or both of the parties were disposed to save 
with a view of bettering their condition, and providing 
for their families in future, the state of things would 
be very different. The farmer, instead of indulging 
himself in ribands, lace, and velvets,* would be dis- 
posed to be satisfied with more simple clothing, but 
by this economy he would disable the manufacturer 
from purchasing the same amount of his produce ; 
and for the returns of so much labour employed upon 
the land, and all greatly increased in productive 
power, there would evidently be no market. The 
manufacturer, in like manner, instead of indulging 
himself in sugar, grapes and tobacco, might be dis- 
posed to save with a view to the future, but would 
be totally unable to do so, owing to the parsimony 
of the farmers and the want of demand for manu- 
factures.! 

An accumulation, to a certain extent, of common 
food and common clothing might take place on both 
sides ; but the amount must necessarily be extremely- 
confined. It would be of no sort of use to the farmer 
to go on cultivating his land with a view merely to 
give food and clothing to his labourers. He would 
be doing nothing either for himself or family, if he 
neither consumed the surplus of what they produced 
himself, nor could realize it in a shape that might be 
transmitted to his descendants. If he were jl tenant, 
such additional care and labour would be entirely 
thrown away ; and if he were a landlord, and were 
determined, without reference to markets, to cultivate 

* Edinburgh Review, No. LX1V. p. 471. 

•f Of all the opinions advanced by able and ingenious men, which I ^ve "«met 
with the opinion of M. Say, which states that, un produit comommeou dehuit est 
In JebolZ/ermt (1. i. ch. U ) appears tome to be the most direct y opposed £ 
just theory, and the most uniformly contradicted by experience. Yet Jt directly 
follow, from the new doctrine, that commodities are to be ^f^^'LiJS 
relation to each other,-not to the consumers. J* hat, I would ask, w«UT be come 
of the demand for commodities, if all consumption except br^ad and water wcie 
Buspended for the next half year ? What an accumulation ot commodities ! 
Ms ! What a prodigious mavket would this event occasion . 



SEC. III.] OF THE PROGRESS OF WEALTH. 283 

his estate in such a way as to make it yield the great- 
est neat surplus with a view to the future, it is quite 
certain that the large portion of this surplus which 
was not required either for his own consumption, or 
to purchase clothing for himself and his labourers, 
would be absolutely wasted. If he did not choose to 
use it m the purchase of luxuries or the maintenance 
of unproductive labourers, it might as well be thrown 
into the sea. To save it, that is to use it in employ- 
ing more labourers upon the land would, as I said 
before, be to impoverish both himself and his family. 
It would be still more useless to the manufacturers 
to go on producing clothing beyond what was want- 
ed by the agriculturists and themselves. Their 
numbers indeed would entirely depend upon the 
demands of the agriculturists, as they would have 
no ue^ans of purchasing subsistence, but in proportion 
as ilv re was a reciprocal want of their manufactures. 
1 he peculation required to provide simple clothing 
tor such a society, with the assistance of good machi- 
nery, would be inconsiderable, and would absorb but 
a small portion of the proper surplus of rich and 
well cultivated land. There would evidently there- 
tore be a general want of demand, both for produce 
and population ; and while it is quite certain that an 
adequate passion for consumption may fully keep up 
the proper proportion between supply and demand, 
whatever may be the powers of production, it appears 
to be quite as certain, that a passion for accumulation 
must inevitably lead to a supply of commodities 
beyond what the structure and habits of such a society 
will permit to be consumed.* * 

But if this be so, surely it is a most important error 
to couple the passion for expenditure and the passion 
for accumulation together, as if they were of the same 

Owelabo'uhe T~ll™^tlv ** ^ T * ■"**•■*- of M, 
that on this point he has the W «f «? * ^ . B ?J 2* d "^edly of opinion, 
mulatioD ensures effitWede^d. lhe «S™irt with those who think thataccu- 



284 ON THE IMMEDIATE CAUSES [CH. VII* 

nature ; and to consider thiC demand for the food and 
clothing of the labourer, who is to be employed pro- 
ductively, as securing such a general demand for 
commodities and such a rate of profits for the capital 
employed in producing them, as will adequately call 
forth the powers of the soil, and the ingenuity of 
man in procuring the greatest quantity both of raw 
and manufactured produce. 

Perhaps it may be asked by those who have adopt- 
ed Mr. Ricardo's view of profits, — what becomes of the 
division of that which is produced, when population 
is checked merely by want of demand ? It is acknow- 
ledged that the powers of production have not begun 
to fail ; yet, if labour produces largely and yet is ill 
paid, it will be said that profits must be high. 

I have already stated in a former chapter, that the 
value of the materials of capital very frequentlynuoes 
not fall in proportion to the fall in the value c v ne 
produce of capital, and this alone will often account 
for low profits. But independently of this considera- 
tion, it is obvious that in the production of any other 
commodities than necessaries, the theory is perfectly 
simple. From want of demand, such commodities 
may be very low in price, and a large portion of the 
whole value produced may go to the labourer, although 
in necessaries he may be ill paid, and his wages, both 
with regard to the quantity of food which he receives 
and the labour required to produce it, may be deci- 
dedly low. 

If it be said, that on account of the large portion of 
the value of manufactured produce which on this sup- 
position is absorbed by wages, it may be affirmed that 
the cause of the fall of profits is high wages, I should 
certainly protest against so manifest an abuse of words. 
The only justifiable ground for adopting a new term, 
or using an old one in a new sense, is, to convey 
more precise information to the reader ; but to refer 
to high wages in this case, instead of to a fall of com- 
modities, would be to proceed as if rlio specific inten- 



SEC. III.] OF THE PROGRESS OF WEALTH. 285 

tion of the writer were to keep his reader as much as 
possible in the dark as to the real state of things. 

In the production of necessaries however, it will 
be allowed, that the answer to the question is not quite 
so simple, yet still it may be made sufficiently clear. 
Mr. Ricardo acknowledges that there may be a limit 
to the employment of capital upon the land from the 
limited wants of society, independently of the 
exhaustion of the soil. In the case supposed, this 
limit must necessarily be very narrow, because there 
would be comparatively no population besides the 
agriculturists to make an effective demand for pro- 
duce. Under such circumstances corn might be pro- 
duced, which would lose the character and quality of 
wealth ; and, as I before observed in a note, all the 
parts of the same produce would not be of the same 
value. The actual labourers employed might be tole- 
rably well fed, as is frequently the' case, practically, 
in those countries where the labourers are fed by the 
farmers,* but there would be little work or food for 
their grown up sons ; and from varying markets and 
varying crops, the profits of the farmer might be the 
lowest at the very time when, according to the divi- 
sion of the produce, it ought to be the highest that 
is when there was the greatest proportionate excess 
of produce above what was paid to the labourer, 
lhe wages of the labourer cannot sink below a cer- 
tain point, but a part of the produce, from excess of 
supply, may for a time be absolutely useless, and 
permanently it may so fall from competition as to 
yield only the lowest profits. 

I would observe further, that if in consequence of 
a diminished demand for corn, the cultivators were to 

uZ In ®.™ w % ani - Sweden » particularly the former, where the agricultural 

n Sn e nf e h T * the farmer ' s fan ' n /°' 1,as « Portton o land ass i S to h in 

in lieu of wages, he , a i n general prettv well fed, although "here £ but lit li 
demand for labour, and considerable competition for such emp oymen In conn 
fu tLVl r u U,m T Cd ' a " d there are ">™y "«* al1 °- r the wo P , dO it ; perfeX 
rnmln'Jn l, mP ■ to .f t,n ? atepr0fits h ? the exces9 of ^ P r «l"ce above what co I 
AH tl^ T ng $ W, ' en for this exce9S there ™y Soften little or no marke? 
All ev.dentlvdnpend, „po n the exchangeable value of the dfaponbte JrooVe 




y 



ON THE IMMEDIATE CAUSES [CH. VII. 

withdraw their capitals so as better to proportion their 
supplies to the quantity that could be properly paid 
for ; yet if they could not employ the capital they 
had withdrawn in any other way, which, according 
to the preceding supposition, they could not, it is 
certain that, though they might for a time make fair 
profits of the small stock which they still continued 
to employ in agriculture, the consequences to them 
as cultivators would be, to all intents and purposes, 
the same as if a general fall had taken place on all 
their capital. 

If, in the process of saving, all that was lost by 
the capitalist was gained by the labourer, the check 
to the progress of wealth would be but temporary, 
as stated by Mr. Ricardo ; and the consequences need 
not be apprehended. But if the conversion of 
revenue into capital pushed beyond a certain point 
must, by diminishing the effectual demand for produce, 
throw the labouring classes out of employment, it is 
obvious that the adoption of parsimonious habits in 
too great a degree may be accompanied by the most 
distressing effects at first, and by a marked depression 
of wealth and population permanently. 

It is not, of course, meant to be stated that parsi- 
mony, or even a temporary diminution of consump- 
tion,* is not often in the highest degree useful, and 
sometimes absolutely necessary to the progress of 
wealth. A state may certainly be ruined by extrava- 
gance ; and a diminution of the actual expenditure 
may not only be necessary on this account, but when 
the capital of a country is deficient, compared with 
the demand for its products, a temporary economy of 
consumption is required., in order to provide that 
supply of capital which can alone furnish the means 
of an increased consumption in future. All that I 
mean to say is, that no nation can possibly grow rich 

* Parsimony, or the conversion of revenue into capita!, mny take place without 
nny diminution of consumption, if the revenue increases first. 



SEC. III.] OF THE PROGRESS OF WEALTH. 287 

by an accumulation of capital, arising from a perma- 
nent diminution of consumption ; because, such ac- 
cumulation being greatly beyond what is wanted, in 
order to supply the effective demand for produce, a 
part of it would very soon lose both its use and its 
value, and cease to possess the character of wealth. 

On the supposition indeed of a given consumption 
the accumulation of capital beyond a certain point 
must appear at once to be perfectly futile. But, 
even taking into consideration the increased consump- 
tion likely to arise among the labouring classes from 
the abundance and cheapness of commodities, yet as 
this cheapness must be at the expense of profits, it 
is obvious that the limits to such an increase of capital 
from parsimony, as shall not be attended by a very 
rapid diminution of the motive to accumulate, are 
very narrow, and may very easily be passed. 

The laws which regulate the rate of profits and 
the progress of capital, bear a very striking and singu- 
lar resemblance to th - which regulate the rate of 
wages and the progi opulation. 

Mr. Ricardo has F ly shewn that the rate 

of profits must dim \tfie progress of accumu- 

lation be finally stc r the most favourable 

circumstances, by < Jg difficulty of procuring 

the food of the lr , I, i n l ike manner, endea- 

voured to shew in aiy .Essay on the Principle of 
Population that, under circumstances the most fa- 
vourable to cultivation which could possibly be sup- 
posed to operate in the actual state of the earth, the 
wages of the labourer would become more scanty 
and the progress of population be finally stopped by 
the increasing difficulty of procuring the means of 
subsistence. 

But Mr. Ricardo has not been satisfied with proving 
the position just stated. He has not been satisfied 
with shewing that the difficulty of procuring the food 
ot the labourer is the only absolutely necessary cause 
of the fall of profits, in which I am ready fully and 



288 



ON THE IMMEDIATE CAUSES [CH VIL 



entirely to agree with him : but he has gone on to 
say, that there is no other cause of the fall of profits 
in the actual state of things that has any degree of 
permanence. In this latter statement he appears to 
me to have fallen into precisely the same kind of error 
as I should have fallen into, if, after having shewn 
that the unrestricted power of population was beyond 
comparison greater than the power of the earth to 
produce food under the most favourable circumstances 
possible, I had allowed that population could not be 
redundant unless the powers of the earth to keep up 
with the progress of population had been tried to the 
uttermost. But I all along said, that population might 
be redundant, and greatly redundant, compared with 
the demand for it and the actual means of supporting 
it, although it might most properly be considered as 
deficient, and greatly deficient, compared with the 
extent of territory, and the powers of such territory 
to produce additional means of subsistence ; that, in 
such cases, notwithstandi^ ; acknowledged de- 

ficiency of population, a obvious desirableness 

of having it greatly in it was useless and 

foolish directly to encoi birth of more chil- 

dren^; as the effect of s igement, without a 

demand for labour and t. r P a ying it proper- 

ly, could only be increase* nd mortality with 

little or no final increase 01 poj. . A on. 

Though Mr. Ricardo has taken a very different 
course, I think that the same kind of reasoning ought 
to be applied to the rate of profits and the progress 
of capital. Fully acknowledging that there is hardly 
a country in the four quarters of the globe where 
capital is not deficient, and in* most of them very 
greatly deficient, compared with the territory and 
even the number of people ; and fully allowing at 
the same time the extreme desirableness of an increase 
of capital, I should say that, where the demand for 
commodities was not such as to afford fair profits to 
the producer, and the capitalists were at a loss where 



o^ 



SEC. III.] OF THE PROGRESS OF WEALTH. 289 

and how to employ their capitals to advantage, the 
saving from revenue to add still more to these capitals 
would only tend prematurely to diminish the motive 
to accumulation, and still further to distress the capi- 
talists, with little increase of a wholesome and effec- 
tive capital. 

The first thing wanted in both these cases of defi- 
cient capital and deficient population, is an effective 
demand lor commodities, that is, a demand by those 
who are able and willing to pay an adequate price for 
them ; and though high profits are not followed by an 
increase of capital, so certainly as high wages are bv 
an increase of population, yet I believe that they are 
so followed more generally than they appear to be, 
because, m many countries, as I have before intimat- 
ed, profits are often thought to be high, owing to the 
high interest of money, when they are really low • 
and because, universally, risk in employing capital has 
precisely the same effect in diminishing the motive to 
accumulate and the reward of accumulation, as low 
profits. At the same time it will be allowed that deter- 
mined extravagance, and a determined indisposition 
to save, may keep profits permanently high. The 
most powerful stimulants may, under peculiar circum- 
stances, be resisted ; yet stiil it will not cease to be 
true that the natural and legitimate encouragement to 
the increase of capital, is that increase of the power 
and will to save which is held out by high profits ; 
and under circumstances in any degree similar, such 
increase of power and will to save must almost always 
be accompanied by a proportionate increase of capital. 

Une of the most striking instances of the truth of 
this remark and a further proof of a singular resem- 
blance ,n the laws that regulate the increase ofcapi- 

1 u°- f P°P ula , tlon . « to be found in the rapidly 
with which the loss of capital is recovered during a 
war whicn does not interrupt commerce. The loans 
to government convert capital into revenue, and in- 
crease demand at the same time that they at first 

37 



290 ON THE IMMEDIATE CAUSES [CH. VII. 

diminish the means of supply.* The necessary con- 
sequence must be an increase of profits. This naturally 
increases both the power and the reward of accumula- 
tion ; and if only the same habits of saving prevail 
among the capitalists as before, the recovery of the 
lost stock must be rapid, just for the same kind of rea- 
son that the recovery of population is so rapid, when, 
by some cause or other, it has been suddenly des- 
troyed. 

It is now fully acknowledged that it would be a 
gross error in the latter case, to imagine that, without 
the previous diminution of the population, the same 
rate of increase would still have taken place ; because 
it is precisely the high wages occasioned by the demand 
for labour, which produce the effect of so rapid an 
increase of population. On the same principle it 
appears to me as gross an error to suppose that, with- 
out the previous loss of capital occasioned by the 
expenditure in question, capital should be as rapidly 
accumulated ; because it is precisely the high profits 
of stock occasioned by the demand for commodities, 
and the consequent demand for the means of producing 
them, which at once give the power and the will to 
accumulate. 

Though it may be allowed therefore that the laws 
which regulate the increase of capital are not quite so 
distinct as those which regulate the increase of popu- 
lation, yet they are certainly just of the same kind ; 
and it is equally vain, with a view to the permanent 
increase of wealth, to continue converting revenue 
into capital, when there is no adequate demand for the 
products of such capital, as to continue encouraging 

* Capital i-s withdrawn only from those employments where it can best be spared. 
It is hardly ever withdrawn from agriculture. Nothing is more common, as I have 
stated in the Chapter on Rent, than increased profits, not only without any capital 
being withdrawn from the land, but under a continual addition to it. Mr. Ricardo's 
assumption of constant prices would make it absolutely impossible to account theo- 
retically for things as they are. If capital were considered as not within the pale 
of demand and supply, the very'familiar event of the rapid recovery of capital dur- 
ing a war would be quite inexplicable. 



SEC. IV.] OF THE PROGRESS OF WEALTH. 291 

marriage and the birth of children, without a demand 
for labour and an increase of the funds for its main- 
tenance. 



SECTION IV. 

Of the Fertility of the Soil, considered as a Stimulus to the 
continued Increase of Wealth, 

In speaking of the fertility of the soil as not afford- 
ing an adequate stimulus to the continued increase of 
wealth, it must always be recollected that a fertile 
soil gives at once the greatest natural capability of 
wealth that a country can possibly possess. When 
the deficient wealth of such a country is mentioned, 
it is not intended always to speak positively, but com- 
paratively, that is with reference to its natural capa- 
bilities ; and so understood, the proposition will be 
liable to few or no exceptions. Perhaps, indeed, it 
may be said that no instance has occurred, in modern 
times, of a large and very fertile country having made 
full use of its natural resources ; while there have been 
many instances of small and unfertile states having 
accumulated within their narrow limits, by means of 
foreign commerce, a degree of wealth very greatly 
exceeding the proportion which should belong to them, 
in reference to their physical capabilities. 

If a small body of people were possessed of a rich 
and extensive inland territory, divided into largp pro- 
portions, and not favourably situated with respect to 
markets, a very long period might elapse before the 
state became wealthy and populous, notwithstanding 
the fertility of the soil and the consequent facility of 
production. The nature of such a soil would make 
it yield a profit or rent to the owner in its uncultivat- 
ed state. He would set a value therefore upon his 



292 ON THE IMMEDIATE CAUSES [CH. VII. 

property, as a source of profit as well as of pow- 
er and amusement ; and though it was capable of 
yielding much more raw produce than he and his 
immediate dependents could consume, he would by 
no m*ans be disposed to allow others to seize on it, 
and divide it at their pleasure. He would probably 
let out considerable portions of it for small rents. 
But the tenant of these portions, if there were no 
foreign vent for the raw produce, and the commodi- 
ties which contribute to the conveniences and luxuries 
of life were but little known, would have but small 
incitement to call forth the resources of his land, and 
give encouragement to a rapid increase of population. 
By employing ten families, he might perhaps, owing 
to the richness of the soil, obtain food for fifty ; but 
he would find no proportionate market for this addi- 
tional food, and would be soon sensible that he had 
wasted his time and attention in superintending the 
labour of so many persons. He would be disposed 
therefore to employ a smaller number ; or if, from 
motives of humanity, or any other reason, he was 
induced to keep more than were necessary for the 
supply of the market, upon the supposition of their 
being tolerably industrious, he would be quite indif- 
ferent to their industry, and his labourers would 
naturally acquire the most indolent habits. Such 
habits would naturally be generated both in the 
masters and servants by such circumstances, and 
when generated, a considerable time and considerable 
stimulants are necessary to get rid of them. 

It has been said, that those who have food and 
necessaries at their disposal, will not be long in want 
of workmen, who will put them in possession of 
some of the objects most useful and desirable to 
them.* But this appearsto be directly contradicted by 
experience. If the establishment, extension, and re- 
finement of domestic manufactures were so easy a 

* Ricardo's Princ. of Polit. Econ. ch. xxi. p. 363. 2d. edit. 



SEC. IV.] OF THE PROGRESS OF WEALTH. 293 

matter, our ancestors would not have remained for 
many hundred years so ill supplied with them ; and 
been obliged to expend the main part of their raw 
produce in the support of idle retainers. They might 
be very ready, when they had the opportunity, to 
exchange their surplus raw produce for the foreign 
commodities with which they were acquainted, and 
which they had learnt to estimate. But it would be 
a very difficult thing, and very ill suited to their habits 
and degree of information, to employ their power of 
commanding labour in setting up manufactures on 
their own estates. Though the land might be rich, 
it might not suit the production of the materials most 
wanted ; and the necessary machinery, the necessary 
skill in using it, and the necessary intelligence and 
activity of superintendance, would all unavoidably be 
deficient at first, and under the circumstances sup- 
posed, must be of very slow growth ; so that after 
those ruder and more indispensable articles were sup- 
plied, which are always wanted and produced in an 
early stage of society, it is natural enough that a 
great lord should prefer distinguishing himself by a 
few splendid foreign commodities, if he could get 
them, and a great number of' retainers, than by a 
large quantity of clumsy manufactures, which in- 
volved great trouble of superintendance. 

It is certainly true, however, taking as an instance 
an individual workman, and supposing him to possess 
a given degree of industry and skill, that the less 
time he is employed in procuring food, the more time 
will he be able to devote to the procuring of conve- 
niences and luxuries ; but to apply this truth to whole 
nations, and to infer that the greater is the facility of 
procuring food, the more abundantly will the people 
be supplied with conveniences and luxuries, would be 
one among the many rash and false conclusions, which 
are often made from the want of due attention to the 
change which the application of a proposition may 
make in the premises on which it rests. In the 



294 ON THE IMMEDIATE CAUSES [CH. VII. 

present case, all depends upon the supposition of a 
given degree of industry and skill, and the means of 
employing them. But if, after the necessaries of life 
were obtained, the workman should consider indo- 
lence as a greater luxury than those which he was 
likely to procure by further labour, the proposition 
would at once cease to be true. And as a matter of 
fact, confirmed by all the accounts we have of nations, 
in the different stages of their progress, it must be 
allowed that this choice seems to be very general in 
the early periods of society, and by no means un- 
common in the most improved states. 

Few indeed and scanty would be the portion of 
conveniences and luxuries found in society, if those 
who are the main instruments of their production had 
no stronger motives for their exertions than the desire 
of enjoying them. It is the want of necessaries 
which mainly stimulates the labouring classes to 
produce luxuries ; and were this stimulus removed or 
greatly weakened, so that the necessaries of life could 
be obtained with very little labour, instead of more 
time being devoted to the production of conveniences, 
there is every reason to think that less time would be 
so devoted. 

At an early period of cultivation, when only rich 
soils are worked, as the quantity of corn is the 
greatest, compared with the quantity of labour re- 
quired to produce it, we ought always to find a small 
portion of the population engaged in agriculture, and 
a large portion engaged in administering to the other 
wants of the society. And there can be little doubt 
that this is the state of things which we really should 
see, were it true, that if the means of maintaining 
labour be found, there can be no difficulty in making 
it produce objects of adequate value ; or that when 
food can be obtained with facility, more time will be 
devoted to the production of conveniences and luxu- 
ries. But in examining the state of unimproved 
countries, what do we really see ? — almosl invariably, 



SEC. IV.] GF THE PROGRESS OF WEALTH. 295 

a much larger proportion of the whole people em- 
ployed on the land, than in those countries where the 
increase of population has occasioned the necessity 
of resorting to poor soils ; and less time, instead of 
more time, devoted to the production of conveniences 
and luxuries. 

Of the great landed nations of Europe, and indeed 
of the world, England, with only one or two excep- 
tions, is supposed to have pushed its cultivation the 
farthest ; and though the natural qualities of its whole 
soil by no means stand very high in the scale of com- 
parative richness, there is a smaller proportion of the 
people employed in agriculture, and a greater propor- 
tion employed in the production of conveniences and 
luxuries, or living on monied incomes, than in any 
other agricultural country of the world. According 
to a calculation of Susmilch, in which he enumerates 
the different proportions of people in different states, 
who live in towns, and are not employed in agricul- 
ture, the highest is that of seven to three, or seven 
people living in the country to three living in the 
towns :* whereas in England, the proportion of those 
engaged in agriculture, compared with the rest of the 
population, is less than as two to three.f 

This is a very extraordinary fact, and affords a strik- 
ing proof how very dangerous it is, in political econo- 
my, to draw conclusions from the physical quality of 
the materials which are acted upon, without reference 
to the moral as well as physical qualities of the 
agents. 

It is undoubtedly a physical quality of very rich 
land, if worked by people possessing a given degree 
of industry and skill, to yield a large quantity of pro- 
duce, compared with the number of hands emploved ; 
but, if the facility of production which rich land gives 

for*ei. S n^!es h V V ervf^n P ' 60 ' r Es . 3a \ on Population, vol. i. p. 4.59. edit. 5th. In 
SEP ffiK&X^ hve " the C ° Untry wh ° are uot en ^ ed in *«■*« ; 
f Population Abstracts, 1811. 



296 ON THE IMMEDIATE CAUSES [CH. VII. 

has the effect, under certain circumstances, of pre- 
venting the growth of industry and skill, the land 
may become practically less productive, compared 
with the number of persons employed upon it, than 
if it were not distinguished for its richness. 

Upon the same principle, the man who can pro- 
cure the necessary food for his family, by tw T o days 
labour in the week, has the physical power of work- 
ing much longer to procure conveniences and luxu- 
ries, than the man who must employ four days in pro- 
curing food ; but if the facility of getting food creates 
habits of indolence, this indolence may make him 
prefer the luxury of doing little or nothing, to the 
luxury of possessing conveniences and comforts ; 
and in this case, he may devote less time to the 
working for conveniences and comforts and be more 
scantily provided, with them than if he had been obli- 
ged to employ more industry in procuring food. 

Among the crowd of countries which tend more or 
less to illustrate and confirm by their present state 
the truth of these positions none perhaps will do it 
more strikingly than the Spanish dominions in Ame- 
rica, of which M. Humboldt has lately given so valu- 
able an account. 

Speaking of the different plants which are cultivat- 
ed in New Spain, he says of the banana, 
i; Je doute qu'il existe une autre plante sur le globe qui, sur 
un si petit espace de terrain, puisse produire une masse oV 
substance nourrissante aussi considerable."* 

He calculates in another place more particularly, that 
• 4 dans un pays eminemment fertile un demi hectare, ou un 
arpent legal cultive en bananes de la grande espece, peut 
nourrir plus de cinquantes individus, tandis qu'en Europe le 
meme arpent ne donneroit par an, en supposant le huitieme 
grain, que 576 kilogrammes de farine de fromenl, quantite qui 
n'est pas suffisante pour la subsistance de deux individus : 
aussi rien ne frappe plus PEuropeen recemment arrive dans 
la zone torride que Pextreme petitisse des terrains cultives 

* Essai Politique sur Ja Xouvelle Espagne, torn. iii. 1. iv. c. ix. p. 23. 



SEC. IV.] OF THE PROGRESS OF WEALTH. 297 

autour d'une cabane qui renferme une famille nombreuse 
d'indigenes."* 

It appears further, that the banana is cultivated 

with a very trifling quantity of labour, and 

4 se perpetue sans que 1'homme y mette d'autre soin que de 

- couper les tiges dont le fruit a muri, et de donner a la terre 

une ou deux fois par an un leger labour en piochant autour 

des racines."t 

What immense powers of production are here 
described ! What resources for unbounded wealth, if 
effectively called into action ? Yet what is the actual 
state of things in this fertile region. M. Humboldt 
says, 

' On entend souvent repeter dans les colonies Espagnoles, 
que les habitans de la region chaude (tierra caliente) ne 
pourront sortir de 1'etat d'apathie dans lequel ils sont plonges 
depuis des siecles, que lorsqu'une cedule royale ordonnera la 
destruction des bananiers. Le remede est violent ; et ceux 
qui le proposent avec tant de chaleur ne deploient generale- 
ment pas plus d'activite que le bas-peuple qu'ils veulent 
forcer au travail en augmentant la masse de ses besoins. II 
faut esperer que l'industrie fera des progres parmi les Mexi- 
cans sans qu'on emploie des moyens de destruction. En 
considerant d'ailleurs la facilite avec laquelle 1'homme se 
nourrit dans un climat ou croissent les bananiers, on ne doit 
pas s'etonner que dans la region equinoctiale du nouveau 
continent la civilisation ait commence dans les montagnes, 
sur un sol moins fertile, sous un ciel moins favorable au devel- 
oppement des etres organises ou le besoin meme reveille 
l'industrie. 

" Au pied de la Cordillere dans les vallees humides des 
Intendances de Vera-Cruz, de A^alladolid, ou de Guadalaxa- 
ra, un homme qui employe seulement deux jours de la se- 
maine a un travail peu penible peut fournir de la subsistance 
a une famille entiere."j 

It appears then, that the extreme fertility of these 
countries, instead of affording an adequate stimulus to 
a rapid increase of wealth and population, has pro- 

* Nouvelle Espagne, torn. iii. 1. iv. c. ix. p. 36. f Id. p. 28. 

i Humboldt's Nouvelle Espagne, tom. iii, ]. iv.c. is. p. 38, 



298 ON THE IMMEDIATE CAUSES [CH. VII. 

duced, under the actual circumstances in which they 
have been placed, a degree of indolence which has 
kept them poor and thinly peopled after the lapse of 
ages. Though the labouring classes have such ample 
time to work for conveniences and comforts, they are 
almost destitute of them. And, even in the necessary 
article of food, their indolence and improvidence pre- 
vent them from adopting those measures which would 
secure them against the effects of unfavourable sea- 
sons. M. Humboldt states that famines are common 
to almost all the equinoctial regions ; and observes 

that, 

" Sous la zone torride, ou une main bienfaisante semble avoir 
repandu )e germe de l'abondance, Phomme insouciant et 
phlegmatique eprouve periodiquement un manque de nourri- 
ture que 1'industrie des peuples cultives eloigne des regions 
les plus steriles du Nord."* 

It is possible, however, that the heat of the climate 
in these lower regions of New Spain, and an inferior 
degree of healthiness compared with the higher 
regions, though by no means such as to preclude a 
full population, may have assisted in keeping them 
poor and thinly peopled. But when we ascend the 
Cordilleras, to climates which seem to be the finest 
in the world, the scene which presents itself is not 
essentially different. 

The chief food of the lower classes of the inhabi- 
tants on the elevated plains of the Cordilleras, is 
maize ; and maize, though not so productive, com- 
pared with the labour employed upon it, as the 
banana, exceeds very greatly in productiveness the 

trains of Europe, and even of the United States, 
lumboldt states, that 
" La fecondite du thaolli, ou mai's Mexicain, est au-dela de 
toute ce que l'on pent imaginer en Europe. La plante, 
favorisee par de fortes chaleurs et par beaucoup d'humidite. 
aquiert une hauteur de deux a trois metres. Dans les belles 

* Essai Politique sur la Nouvelle Espagoe, torn. i. 1. ii. c. v. p, 35K- 



SEC. IV.] OF THE PROGRESS OF WEALTH. 299 

plaines qui s'etendent depuis San Juan del Rio a Quiretaro, 
par exemple, dans les terres de la grande metairie de l'Espe- 
ranza, un fanegue de rnais en produit quelquefois huit cents ; 
des terreins fertiles en donnent, annee commune, trois a 
quatre cents. Dans les environs de Valladolid on regarde 
comme mauvaise une recolte qui ne donne que 130 ou 150 
fois la semence. La ou le sol est le plus sterile, on compte 
encore soixante ou quatrevingt grains. On croit qu'en 
general le produit du mais peut etre evalue dans la region 
equinoctiale du royaume de la Nouvelle Espagne a cent 
cinquante pour un."* 

This great fertility produces, as might be expected, 
its natural effect of making the maintenance of a 
family in ordinary times extremely easy. 

In the town of Mexico itself, where provisions are 
very considerably dearer than in the country, on 
account of the badness of the roads, and the expense 
of carriage, the very dregs of the people are, accord- 
ing to Humboldt, able to earn their maintenance by 
only one or two days' labour in the week.f 
" Les rues de Mexico fourmillent de vingt a trente mille 
malheureux (Saragates Guachinangos), dont la plupart pas- 
sent la nuit a la belle etoile, et s'etendent le jour au soleil, 
le corps tout nu enveloppe dans une couverture de flanelle. 
Cette lie du peuple, Indiens et Metis, presentent beaucoup 
d'analogie avec les Lazaronis de Naples. Paresseux, insou- 
cians, sobres comme eux, les Guachinangos n'ont cependant 
aucune ferocite dans le c.aractere ; ils ne demandent jamais 
l'aumone : s'ils travaillent un ou deux jours par semaine, ils 
gagnent ce qu'il leur faut pour acheter du pulque, ou de ces 
canards qui couvrent les lagunes Mexicaines, et que l'on rotit 
dans leur propre graisse." 

But this picture of poverty is not confined to the 
dregs of the inhabitants of a large town. 
' Les Indiens Mexicains, en les considerant en masse, presen- 
tent le tableau d'une grande misere. Relegues dans les terres 
les moins fertiles ; indolens par caractere, et plus encore par 
suite de leur situation politique, les natifs ne vivent qu'au 
jour le jour."J 

* Essai Politique sur la Nouvelle Espagne, torn. iii. 1. iv. c. ix. p. 56. 

f Torn, ii. 1. ii. c. vii. p. 37. ^ Tom. i. liv. ii\ c. vi. p. 429. 



300 ON THE IMMEDIATE CAUSES [CH. VII. 

With these habits they are little likely to make 
provision against the occasional failures in the crops 
of maize, to which these crops are peculiarly liable ; 
and consequently, when such failures take place, they 
are exposed to extreme distress. Speaking generally 
of the obstacles to the progress of population in New 
Spain, Humboldt seems to consider famine and the 
diseases which it produces, as the most cruel and 

destructive of all. 

" Les Indiens Americains," (he says) " comme les habitans 
de l'Indostan, sont accoutumes a se contenter de la moindre 
quantite d'alimens qu'exige le besoin de la vie ; ils augmen- 
tent en nombre sans que l'accroissement des moyens de sub- 
sistance soit proportional a cette augmentation depopulation. 
Indolens par caractere, et surtout a cause de la position dans 
laquelle ils se trouvent sous un beau climat, sur un sol 
generalement fertile, les indigenes ne cultivent en mai's, en 
pommes de terre, et en froment que ce qu'il leur faut pour 
leur propre nourriture, ou tout au plus ce que requiert la 
consommation des villes et celle des mines les plus voisines." 
And further on, he says, " le manque de proportion qui existe 
entre les progres de la population et l'accroissement de la 
quantite d'alimens produite par la culture, renouvelle le 
spectacle affligeant de la famine chaque fois qu'une grande 
secheresse ou" quelque autre cause locale a gate la recolte 
du mais."* 

These accounts strikingly shew the indolence and 
improvidence which prevail among the people. Such 
habits must necessarily act as formidable obstacles in 
the way of a rapid increase of wealth and population. 
Where they have been once fully established, they are 
not likely to change, except gradually and slowly 
under a course of powerful and effective stimulants. 
And while the extreme inequality of landed property 
continues, and no sufficient vent is found for the raw 
produce in foreign commerce, these stimulants will 
be furnished very slowly and inadequately. 

That the indolence of the natives is greatly aggra- 
vated by their political situation, cannot for a moment 

* IVonvellc Espagne, torn. i. liv. ii. c. v. pp. 355 et 356. 



SEC. IV.] OF THE PROGRESS OF WEALTH. 301 

be doubted ; but that, in spite of this situation, it 
yields in a great measure to the usual excitements, is 
sufficiently proved by the rapid cultivation which 
takes place m the neighbourhood of a new mine, 
where an animated and effective demand is created 
tor labour and produce. 

" Bientot le besoin reveille Industrie ; on commence a la- 
Dourer le sol dansles ravins, et sur lespentes des montagnes 
voisines, par tout ou le roc est couvert de terreau : des fer- 
mes s etablissent dans le voisinage de la mine : la cherte des 
vivres, le pnx considerable auquel la concurrence des ache- 
teurs maintient tous les produits de l'agriculture, dedomma- 
gent le cultivateur des privations auxquelles l'expose la vie 
penible des montagnes."* 

When these are the effects of a really brisk demand 
for produce and labour, we cannot be at a loss for the 
mam cause of the slow cultivation which h— 
place over the greatest part of the country, 
in the neighbourhood of the mines and near t 
towns, the effective demand for produce is » 
as to induce the great proprietors to bring 
mense traets of land properly into cultivit 
the population, which, as we have seen, pre 
against the limits of subsistence, evidently e> 
general the demand for labour, or the number 
sons which the country can employ with ree 
and constancy in the actual state of its aericultur 
manufactures. 

In the midst of an abundance of fertile land 
appears that the natives are often very scantilv sun- 
plied with it. They would gladly cultivate portions 
of the extensive districts held by the great proprietors 
and could not fail of thus deriving an am^i^S 
fence for themselves and families*; but in the actual 
state of the demand for produce in many parts of the 
country, and in the actual state of the ignorance and 
indolence of the natives, such tenants might not be 
able to pay a rent equal to what the land would yield 

* AWelle Espagne, torn. iii. liv.iv. c. ix. p. 12. 





302 ON THE IMMEDIATE CAUSES [CH. VH. 

in its uncultivated state, and in this case they would 
seldom be allowed to intrude upon such domains ; 
and thus lands which might be made capable of sup- 
porting thousands of people, may be left to support a 
few hundreds of cattle. 

Speaking of a part of the Intendancy of Vera Cruz, 
Humboldt says, 

" Aujourd'hui des espaces de plusieurs lieues carrees sont 
occupes par deux ou trois cabanes, autour desquelles errent 
des boeufs a demi-sauvages. Un petit nombre de families 
puissantes, et qui vivent sur le plateau central, possedent la 
plus grande partie du littoral des Tntendances de Vera Cruz, 
et de San Luis Potosi. Aucune loi agraire ne force ces riches 
proprietaires de vendre leurs majorats, s'ils persistent a ne 
pas vouloir defricher eux-memes des terres immenses qui en 
dependent."* 

* Among proprietors of this description, caprice and 
e might often prevent them from cultivating 
ds. Generally, however, it might be expect- 
hese tendencies would yield, at least in a con- 
degree, to the more steady influence of self- 
But a vicious division of territory prevents 
e of interest from operating so strongly as it 
do in the extension of cultivation. Without 
foreign commerce to give value to the raw 
of the land ; and before the general introduc- 
manufactures had opened channels for domestic 
,try, the demand of the great proprietors for 
our would be very soon supplied ; and beyond this, 
.ne labouring classes would have nothing to give them 
for the use of their lands. Though the landholders 
might have ample power to support an extended popu- 
lation on their estates, the very slender increase of 
enjoyments, if any, which they might derive from it, 
would rarely be sufficient to overcome their natural 
indolence, or overbalance the possible inconveniences 
or trouble that might attend the proceeding. Of that 
encouragement to the increase of population, which 

* Tom. ii. 1. iii. c. viii. p. 342. 



SEC. IV.] OP THE PROGRESS OF WEALTH. 303 

arises from the division and sub-division of land as 
new families are brought into being, the country is 
deprived by the original state of property, and the 
feudal customs and habits which it necessarily tends 
to generate. And under these circumstances, if a 
comparative deficiency of commerce and manufac- 
tures, which great inequality of property tends rather 
to perpetuate than to correct, prevents the growth of 
that demand for labour and produce, which can alone 
remedy the discouragement to population occasioned 
by this inequality, it is obvious that Spanish America 
may remain for ages thinly peopled and poor, com- 
pared with her natural resources. 

And so, in fact, she has remained. For though the 
increase of population and wealth has been considera- 
ble, particularly of late years, since the trade with the 
mother-country has been more open, yet altogether it 
has been far short of what it would have been, even 
under a Spanish government, if the riches of the soil 
had been called forth by a better division of landed pro- 
perty, or a greater and more constant demand for raw 
produce. 

Humboldt observes that 
" Les personnes qui ont reflechi serieusement sur la richesse 
du sol Mexicain savent que, par le moyen d'une culture plus 
soignee, et sans supposer des travaux extraordinaires pour 
J irrigation des champs, la portion de terrain deia defrirhe 
pourroic fournir de la subsistance pour une population huita 
dix lois plus nombreuse." He then adds, very justly " Si 
les plaines fertiles d'Atalisco, de Cholula et de Pu/bla ne 
produisent pas des recoltes plus abondantes, la cause prin- 
cipale doitetre cherchee dansle manque des consommateurs, 
et dans les entraves que les inegalites du sol opposent ail 
commerce inteneur des grains, surtout a leur transport vers 
les cotes qui sont baignees par la mer des Antilles."* 
In the actual state of these districts, the main and 
immediate cause which retards their cultivation is 
indeed the want of consumers, that is, the want of 
power to sell the produce at such a price as will at 

* Tom. iii, I. \v. c, ix. p. 89. 



304 ON THE IMMEDIATE CAUSES [CH. VII- 

once encourage good cultivation, and enable the farm- 
ers to give the landlords something that they want, 
for the use of their land. And nothing is so likely to 
prevent this price from being obtained, as any obsta- 
cles natural or artificial to internal and external com- 
merce. 

That the slow progress of New Spain in wealth 
and population, compared with its prodigious re- 
sources, has been more owing to want of demand 
than want of capital, may fairly be inferred from the 
actual state of its capital, which, according to Hum- 
boldt, is rather redundant than deficient. Speaking 
of the cultivation of sugar, which he thinks might 
be successfully carried on in New Spain, he says, 
" La Nouvelle Espagne, outre Pavantage de sa population, 
en a encore un autre tres important, celui d'une masse 
enorme de capitaux amonceles chez les proprietaires des 
mines ou entre les mains pe negocians qui se sont retires 
du commerce."* 

Altogether the state of New Spain, as described by 
Humboldt, clearly shews — 

1st. That the power of supporting labour may 
exist to a much greater extent than the will. 

2dly. That the time employed in working for 
conveniences and luxuries is not always great in 
proportion as the time employed in working for food 

is small. 

3dly. That the deficient wealth of a fertile coun- 
try may be more owing to want of demand than want 
of capital. 

And! in general, that fertility of soil alone is not 
an adequate stimulus to the continued increase of 

wealth. 

It is not necessary, however, to go so far as the 
Spanish dominions in America, to illustrate these 
propositions. The state of the mother-country itself, 
and of most of the countries of Europe, would 

* Torn. iii. 1. iv. c. x. p. 178- 



SEC. IV.] OF THE PROGRESS OF WEALTH. 305 

furnish the same conclusions. We need not indeed 
go farther than Ireland to see a confirmation of them 
to a very considerable extent. 

th7i C Cul f fT °/ l L he Potatoe, and its adoption as 
the general food of the lower classes of the people 
« Ireland, has rendered the land and labour necessa- 
ry to maintain a family, unusually small, compared 
with most of the countries of Europe- The conse- 
bv e s'u C c e h° a '■ fa fr ty ° f Pr0ducti0 "' ""^compan e d 
rir k fall T ?■ { T^ e circumst ^ces as would 
gne it full effect , n the increase of wealth, is a state 

t^SSLSTi^ hl man J.^P-ts,' countries 
less advanced m civilization and improvement. 

lhe prominent feature of Ireland is, the power 

which .t possesses and actually exercises of support 

an! thr^ g T 3ter , P ° pulation tha » " ^ SJE, 
th"„i i" a h" ral an<1 " eC f Sar ^ effect of ** «ate of 
dolefe'e T? v f r ^ neraI Prevalence of habits of in- 
fluence. 1 he landed proprietors and principal tenant 
being possessed of food and necessarie sfr at Tea 
of the ready means of procuring them have found 

workmen *!?%£* V^ c ~ "' "ut ts 
vvommen not hnding sufficient employment in rh P 

forms on which they had settled, have rarely been 
able to put their landlords in posse sion of the objects 
" most useful and most desirable" to them Some 

.mes indeed, from the competition forTand oc^a-" 
smned by an overflowing population, very h l h r em s 
have been given for small portions of ground fit for 

he growth of potatoes ; but as the powlr of pavit 

upon t r he nt n "** f*** b 3 C «"^ble E 

lies nnln ?™ ° f ^^ WOrk ' the numb ^ of famt 
lies upon an estate, who can pay high monev rent, 

must have an obvious limit. This lirnif, tE i7reason 
to believe, has been often found in the inabi litv nf 

for 'itS? PaJ H he T Whlch "^""oSted 
lor and it is generally understood that the most in 

telligent Irish landlords, influenced both by motived 

of humanity and interest, are now eXlrbg * 



306 ON THE IMMEDIATE CAUSES [CH. VII. 

check the progress of that redundant population upon 
their estates, which, while it generates an excessive 
degree of poverty and misery as well as indolence, 
seldom makes up to the employer, in the lowness of 
wages, for the additional number of hands which he 
is obliged to hire, or call upon for their appointed 
service in labour. He is now generally aware that a 
smaller number of more industrious labourers would 
enable him to raise a larger produce for the consump- 
tion of towns and manufacturers, and at the same 
i ime that they would thus contribute more largely to 
(he general wealth of the country, would be in a 
more happy condition themselves, and enable him to 
derive a larger and more certain rent from his estates. 
It may fairly be said therefore, that the possessors of 
food and necessaries in Ireland have not been able to 
obtain the objects most useful and desirable to them 

in return. 

The indolence of the country -labourers in Ireland 
has been universally remarked. And whether this 
arises from there being really little for them to do in 
the actual state of things, or from a natural tendency 
to idleness, not to be overcome by ordinary stimu- 
lants ; it is equally true that the large portion of time 
of which they have the command, beyond what is 
employed in providing themselves with necessaries, 
does not certainly produce the effect of making them 
abound in conveniences and luxuries. The poor 
clothing and worse lodging of the Irish peasant are 
as well known, as the spare time which it might be 
expected would be the means of furnishing him amply 
with all kinds of conveniences. 

In defence, however, of the Irish peasant, it may be 
truly said, that in the state of society in which he has been 
placed, he has not had a fair trial ; he has not been sub- 
jected to the ordinary stimulants which produce indus- 
trious habits. In almost every part of the island, par- 
ticularly in the south and west, the population ot the 
country districts is greater than the actual business 



SEC. IV.] OF THE PROGRESS OF WEALTH. 307 

to be done on the land can employ. If the people, 
therefore, were ever so industriously inclined, it is not 
possible for them all to get regular employment in the 
occupations which belong to the soil. In the more 
hilly parts of the country which are devoted chiefly 
to pasture, this impossibility is more particularly 
stnking. A small farm among the Kerry mountains 
may support perhaps a large family, among whom 
are a number of grown-up sons ; but the business to 
be done upon the farm is a mere trifle. The greatest 
part of it falls to the share of the women. What 
remains tor the men cannot occupy them for a number 
ot hours equal to a single day in the week ; and the 
consequence is, they are generally seen loitering 
about, as if time was absolutely of no value to them. 
Ihey might, one should suppose, with all this 
leisure, employ themselves in building better houses, 
or at least in improving them, and keeping them neat 
and clean. But with regard to the first, some diffi- 
culties may occur in procuring materials ; and with 
regard to the second, it appears from experience, that 
the object is either not understood, or not considered 
as worth the trouble it would cost. 

They might also, one should suppose, grow or 
purchase the raw materials of clothing, and work 
them up at home ; and this in fact is really done to a 
certain extent. Most of the linen and woollen they 
wear is prepared by themselves. But the raw mate- 
rials when not of home growth, cannot be purchased 
without great difficulty, on account of the low monev 
prices of labour ; and in preparing them for wear, the 
temptations to indolence will generally be too power- 
tul tor human weakness, when the question is merely 
about a work which may be deferred or neglected 
with no other effect than that of being obliged to 
wear old clothes a little longer, in a country where 
custom is certainly in their favour. 

the ™.Vof V P6? T C ° Uld fi ' ld SUch a market for 
ttie lesult of his in-door occupations as would give 



308 ON THE IMMEDIATE CAUSES [CH. VH, 

him constant employment at a fair money price, his 
habits might soon change; but it may be doubted 
whether any large body of people in any country ever 
acquired regular and industrious habits, where they 
were unable to get regular and constant work, and 
when, to keep themselves constantly and beneficially 
employed, it was necessary to exercise a great degree 
of providence, energy, and self-command. 

It may be said, perhaps, that it is capital alone 
which is wanted in Ireland, and that if this want 
were supplied, all her people might be easily employed. 
That one of the great wants of Ireland is capital will 
be readily allowed ; but I conceive it would be a very 
great mistake to suppose that the importation of a 
large quantity of capital, if it could be effected, would 
at once accomplish the object required, and create a 
quantity of wealth proportioned to the labour which 
seems ready to be employed in its production. The 
amount of capital which could belaid out in Ireland 
in preparing goods for foreign sale, must evidently 
depend upon the state of foreign markets ; and the 
amount that could be employed in domestic manu- 
factures, must as evidently depend upon the domestic 
demand. An attempt to force a foreign market by 
means of capital, must necessarily occasion a prema- 
ture fall of profits, and might, after great losses, be 
quite ineffectual ; and with regard to the domestic 
demand, while the habits of the great mass of the 
people are such as they are at present, it must be 
quite inadequate to take off the products of any con- 
siderable mass of new capital. In a country, where 
the necessary food is obtained with so little labour, 
and the population is still equal or nearly equal to the 
produce, it is perhaps impossible that the time not 
devoted to the production of food should create a pro- 
portionate quantity of wealth, without a very decided 
taste for conveniences and luxuries among the lower 
classes of society, and such a power of purchasing as 
would occasion an effective demand for them. But 



=iEC. IV.] OF THE PROGRESS OF WEALTH. 309 

it is well known that the taste of the Irish peasant 
tor articles of this description is yet to be formed. 
His wants are few, and these wants he is in the habit 
of supplying principally at home. Owing to the 
cheapness of the potatoe, which forms the principal 
food of the lower classes of the people, his money 
wages are low ; and the portion which remains, after 
providing absolute necessaries, will go but a very 
little way in the purchase of conveniences. All these 
circumstances are most unfavourable to the increase 
ot wealth derived from manufactures destined for 
home consumption. But the tastes and habits of a 
large body of people are extremely slow in changing- 
and m the mean time the application of capital in 
larger quantities than was suited to the progress of 
the change, would certainly fail to yield such profits 
'is would encourage its continued accumulation and 
application in the same way. In general it may be 
said that demand is quite as necessary to the increase 
of capital as the increase of capital is to demand. 
1 ney mutually act upon and encourage each other 
and neither of them can proceed with vigour if the 
other be left far behind. 

In the actual state of Ireland, I am inclined to 
believe, that the check which the progress of her 
manufactures has received, has been owing to a want 
of demand rather than a want of capital. Her pecu- 
iiar distress uponthe termination of the late war had 
unquestionably this origin, whatever might have been 
the subsequent destruction of capital. And the great 
checks to her manufactures formerly were the unjust 
and impolitic restrictions imposed by England which 
prevented, or circumscribed the demand for them. 
When, however, a brisk demand for any manufacture 
has existed, few instances I believe have occurred of 
its being allowed to languish through the want of 
capital I ; though there is reason to think that advances 
of capital have been sometimes made, which have 
tailed to create an adequate market 



310 ON THE IMMEDIATE CAUSES [cil. VII. 

The state of Ireland in respect to the time and labour 
necessary to the production of her food is such, that 
her capabilities for manufacturing and commercial 
wealth are prodigious. If an improved system of 
agriculture were to raise the food and raw meterials 
required for the population with the smallest quantity 
of labour necessary to do it in the best manner, and 
the remainder of the people, instead of loitering about 
upon the land, were engaged in manufactures and 
commerce carried on in great and flourishing towns, 
Ireland would be beyond comparison richer than 
England. This is what is wanted to give full scope 
to her great natural resources ; and to attain this state 
of things an immense capital is undoubtedly required ; 
but it can only be employed to advantage as it is 
gradually called for ; and a premature supply of it 
would be much less beneficial and less permanent ir 
its effects, than such a change in the tastes and habits 
of the lower classes of people, and such an alteration 
in the mode of paying their labour, as would give 
them both the will and the power to purchase domes- 
tic manufactures and foreign commodities. 

The state of Ireland then may be said to lead to 
nearly the same conclusions as that of New Spain, and 

to shew — 

That the power of supporting labour may often 
exist to a much greater extent than the will ; 

That the necessity of employing only a small por- 
tion of time in producing food, does not always occa- 
sion the employment of a greater portion of time in 
procuring conveniences and luxuries ; 

That the deficiency of wealth in a fertile country 
may be more owing to want of demand than to want 

of capital ; 

And, in general, that the fertility of the soil alone 
is not an adequate stimulus to the permanent increase 
of wealth. 



SEC. V.] OF THE PROGRESS OF WEALTH. oil 



SECTION V. 



Of inventions to save Labour, considered as a Stimulus to the 
continued Increase of Wealth. 

Inventions to save Labour seldom take place to any 
considerable extent, except when there is a decided 
demand for them. They are the natural products of 
improvement and civilization, and, in their more per- 
fect forms, generally come in aid of the failing Dow- 
ers of production on the land. The fertility of the 
sod, being a gift of nature, exists whether it'is want- 
ed or not ; and must often therefore exceed for many 
hundred years the power of fully using it. Inventions, 
which substitute machinery .for manual exertions' 
being the result of the ingenuity of man, and called 
forth by his wants, will, as might be expected, seldom 
greatly exceed those wants. 

But the same laws apply to both. They both 
come under the head of facilities of production : and 
in both cases a full use cannot be made of this facili- 
ty, unless the power of supply which it furnishes be 
accompanied by an adequate extension of the mar- 
ket. 

When a machine is invented, which, by saving 
labour, will bring goods into the market at a much 
cheaper rate than before, the most usual effect is such 
an extension of the demand for the commodity, by its 
being brought within the power of a much greater 
number of purchasers, that the value of the whole 
mass of goods made by the new machinery greatly 
exceeds their former value; and, notwithstanding the 
saving of labour, more hands, instead of fewer, are 
required in the manufacture. 

This effect has been very strikingly exemplified in 
the cotton machinery of this country. The con- 
sumption of cotton goods has been so greatly extended 
both at home and abroad, on account of their cheap- 



I 



312 ON THE IMMEDIATE CAUSES [cH. VII. 

ness, that the value of the whole of the cotton goods 
and twist now made exceeds, beyond comparison ? the 
former value ; while the rapidly increasing population 
of the towns of Manchester, Glasgow, &lc. during the 
last thirty years, amply testifies that, with a few tem- 
porary exceptions, the demand for the labour concerned 
in the cotton manufactures, in spite of the machinery 
used, has been increasing very greatly. 

When the introduction of machinery has this effect, 
it is not easy to appreciate its enriching power, or its 
tendency to increase both the value and quantity of 
domestic and foreign commodities. 

When however the commodity to which machi- 
nery is applied is not of such a nature, that its con- 
sumption can extend with its cheapness, the increase 
of wealth derived from it is neither so great nor so 
certain. Still however it may be highly beneficial ; 
but the extent of this benefit depends upon a contin- 
gency. Let us suppose a number of capitalists in 
the habit of employing 20,000/. each in a manufac- 
ture of limited consumption, and that machines were 
introduced which, by the saving of labour, would 
enable them to supply the actual demand for the com- 
modity with capitals of ten thousand pounds each, 
instead of twenty. There would, in this case, be a 
certain number of ten thousand pounds, and the men 
employed by these capitals, thrown out of employ- 
ment. On the other hand, there would be a portion 
of revenue set free for the purchase of fresh commo- 
dities; and this demand would undoubtedly be of 
the greatest advantage in encouraging the employ- 
ment of the vacant capitals in other directions. At 
the same time it must be recollected that this demand 
is not a new one, and,, even when fully supplied, 
could only replace the diminution of capital and pro- 
fits in one department, occasioned by the employment 
of so many ten thousands, instead of twenty thou- 
sands. But in withdrawing capital from one employ- 
ment and placing it in another, there is almost always 



SEC. V.] OF THE PROGRESS OF WEALTH. 313 

a considerable loss. Even if the whole of the 
remainder were directly employed, it would be less 
in amount. Though it might yield a greater produce, 
it would not command the same quantity of labour as 
before ; and, unless more menial servants were used, 
many persons would be thrown out of work ; and 
thus the power of the whole capital to command the 
same quantity of labour would evidently depend upon 
the contingency of the vacant capitals being with- 
drawn undiminished from their old occupations, and 
finding immediately equivalent employ. .'c^nt in oth- 
ers. 

If, in order to try the principle, we were to push 
it farther, and to suppose that, without any extension 
of the foreign market for our goods, we could by- 
means of machinery obtain all the commodities at 
present in use, with one third of the labour now 
applied, is it in any degree probable that the mass of 
vacant capitals could be advantageously employed, or 
that the mass of labourers thrown out* of work could 
find the means of commanding an adequate share of 
the national produce ? If there were other foreign 
trades which, by means of the capital and labour 
thrown our of employment, might be greatly extend- 
ed, the case would be at once quite altered, and the 
returns of such trades might furnish stimulants suffi- 
cient to keep up the value of the national income. 
But, if only an increase of domestic comrrodities could 
be obtained, there is every reason to fear that the 
exertions of industry would slacken. The peasant, 
who might be induced to labour an additional number 
of hours for tea or tobacco, might prefer indolence to 
a new coat. The tenant or small owner of land, 
who could obtain the common conveniences and lux- 
uries of life at one third of their former price, might not 
labour so hard to procure the same amount of surplus 
produce from the land. And the trader or merchant, 
who would continue in his business in order to be able 
to drink and give his guests claret and champagne, 

40 



314 ON THE IMMEDIATE CAUSES [cH. VII* 

might think an addition of homely commodities by no 
means worth the trouble of so much constant atten- 
tion. 

It has been said that, when there is an income 
ready for the demand, it is impossible that there should 
be any difficulty in the employment of labour and 
capital to supply it, as the owner of such an income, 
rather than not' spend it, would purchase a table or 
chair that had cost the labour of a hundred men for 
a year. This may be true, in cases of fixed monied 
revenues, drained by inheritance, or with little or no 
trouble. We well know that some of the Roman 
nobles, who obtained their immense wealth chiefly by 
the easy mode of plunder, sometimes gave the most 
enormous prices for fancied luxuries. A feather will 
weigh down a scale when there is nothing in the 
opposite one. But where the amount of the incomes 
of a country depend, in a considerable degree, upon 
the exertion of labour, activity and attention, there 
must be something in the commodities to be obtained 
sufficiently desirable to balance this exertion, or the 
exertion will cease. And experience amply shews, by 
the number of persons who daily leave ofY business, 
when they might certainly have continued to improve 
their fortunes, that most men place some limits, how- 
ever variable, to the quantity of conveniences and lux- 
uries which they will labour for ; and that very few 
indeed would attend a counting-house six or gight 
hours a day, in order to purchase commodities which 
have no other merit than the quantity of labour which 
has been employed upon them. 

Still however it is true that, when a great income 
has once been created in a country, in the shape of a 
large mass of rents, profits and wages, a considerable 
resistance will be made to any essential fall in its 
value, [t is a very just remark of Hume,* that when 
the affairs of a society are brought to this situation ;- 

• Essays, vol. i. p. 293. 



SEC. V.] OF THE PROGRESS OF WEALTH. 315 

that is, when, by means of foreign trade, it has acquir- 
ed the tastes necessary to give value to a great quanti- 
ty of labour not employed upon actual necessaries, it 
may lose most of this trade, and yet continue great 
and powerful, on account of the extraordinary efforts 
which would be made by the spare capital and inge- 
nuity of the country to refine home manufactures, in 
order to supply the tastes already formed, and the 
incomes already created. But if we were to allow 
that the income of such a nation might, in this way, 
by possibility be maintained, there is little chance of 
its increasing ; and it is almost certain that it would 
not have reached the same amount, without the mar- 
ket occasioned by foreign commerce. 

Of this I think we shall be convinced, if, in our own 
country, we look at the quantity of goods which we 
export chiefly in consequence of our machinery, and 
consider the nature of the returns obtained for them. 
In the accounts of the year ended the 5th of January 
1818, it appears that the exports of three articles alone 
in which machineiy is used — cottons, woollen and 
hardware, including steel goods, &e. are valued at 
above 29 millions. And among the most prominent 
articles of the imports of the same year, we find coffee, 
indigo, sugar, tea, silks, tobacco, wines, and cotton- 
wool, amounting in value all together to above 18 
millions out of thirty ! Now I would ask how we 
should have obtained these valuable imports, if (he 
foreign markets for our cottons, woollens, and hard- 
ware had not been extended with the use of machine- 
ry ? And further, where we could have found substi- 
tutes at home for such imports, which would have 
been likely to have produced the same effects, in 
stimulating the cultivation of the land, the accumula- 
tion of capital, and the increase of population ? And 
when to these considerations we add the fortunes 
which have been made in these manufactures, the 
market for which has been continually extending, and 
continually requiring more capital and more people to 



316 ON THE IMMEDIATE CAUSES [cil. VII. 

be employed in them ; and contrast with this state of 
things the constant necessity of looking out for new 
modes of employing the same capital and the same 
people, a portion of which would be thrown our of 
their old occupations by every new invention; — we 
must be convinced that the state of this country would 
have been totally different from what it is, and that it 
would not certainly have acquired the same income in 
rents, profits and* wages, if the same ingenuity had 
been exercised in the "invention of machinery, with- 
out the same extension of the market for the comra 
dities produced. 

It may justly be doubted, whether, at the present 
moment, upon the supposition of our foreign inter- 
course being interrupted, we should be likely to find 
efficient substitutes for teas, coffee, sugar, wines, silks, 
indigo, cottons, &c. so as to keep up the value of our 
present income ; but it cannot well be doubted, that 
if, from the time of Edward the First, and setting out 
with the actual division of landed property which then 
prevailed, the foreign vent for cur commodities had 
remained stationary, our revenue from the land alone 
would not have approached to what it is at present, 
and still less, the revenue from trade and manufac- 
tures. 

Even under the actual division of the landed pro- 
perty in Europe, which is very much better than it 
was 500 years ago, most of the states of which it is 
composed would be comparatively unpeopled, ii if 
were not for trade and manufactures. Without I 
excitements arising from the results of this sort of in- 
dustry, no sufficient motives could be presented to 
them either to divide their great estates by sale, or to 
take care that they were well cultivated. 

According to Adam Smith, the most important 
manufactures of the northern and western parts of 
Europe were established either in imitation of foreign 
articles, the tastes for which had been already formed 
by a previous foreign trade, or by the gradual refine- 



SEC. V.] OF THE PROGRESS OF WEALTH. 317 

ment of domestic commodities till they were fit for 
exportation.* In the first case, the very origin of 
the manufacture is made to depend upon a previous 
extension of market, and the importation of foreign 
articles ; and in the second case, the main object and 
use of refining the domestic commodities in an inland 
country, appears to be the fitting them for aiT exten- 
sive market, without which the local advantages en- 
joyed would be in a great measure lost. 

In carrying on the late war, we were powerfully 
assisted by our steam-engines, which enabled us to 
command a prodigious quantity of foreign produce 
and foreign labour. But how would their efficacy 
have been weakened if we could not have exported 
our cottons, cloths and hardware ? 

If the mines of America could be successfully 
worked by machinery, and the King of Spain's tax 
could be increased at will, so as to make the most of 
this advantage, what a vast revenue might they not 
be made to afford him ! But it is obvious that the 
effects of such machinery would sink into insignifi- 
cance, if the market for the precious metals were 
confined to the adjacent countries, and the principal 
effect of it was to throw capital and labour out of 
employment. 

In the actual state of things in this country, the 
population and wealth of Manchester, Glasgow, 
Leeds, fee. have been greatly increasing ; because, 
on account of the extending demand for their goods, 
more people have been continually required to work 
them up ; but if a much smaller number of people 
had been required, on account of a saving of labour 
from machinery, without an adequate extension of 
the market, it is obvious that these towns would have 
been comparatively poor, and thinly peopled. To 
what extent the spare capital and labour thrown out 
of employment in one district would have enriched 

* Wealth of Nations, Vol. ii. B. iii. ch. Hi. p. 115. 6th edit. 



318 ON THE IMMEDIATE CAUSES [CH. VII. 

others, it is impossible to say ; and on this subject 
any assertion may be made, as we cannot be set 
ri«4t by an appeal to facts. But I would ask, whether 
there are any grounds in the slightest degree plausible 
for saying, that not only the capital spared at any 
time from these manufactures would be preserved 
and employed elsewhere ; but that it would be em- 
ployed as profitably, and create as much exchangea- 
ble value in other places as it would have done in 
Manchester and Glasgow, with an extending market r 
In short, are there any plausible grounds whatever 
for stating that, if the twenty millions worth of cot- 
tons which we now export, were entirely stopped, 
either by successful foreign competition or positive 
prohibitions, we should have no difficulty in finding 
employment for our capital and labour equa ly ad- 
vantageous to individuals in point of profit, and 
equally enriching to the country with respect to the 
exchangeable value of its revenue ? 

Unquestionably any country has the power ol con- 
suming all that ^produces, however great in quantity ; 
and every man in health has the power of applying 
his mind and body to productive labour for ten or 
twelve hours of the day. But these are dry asser- 
tions respecting the powers of a country, which do 
not necessarily involve any practical consequences re- 
lating to the increase of wealth. If we could not 
export our cottons, it is quite certain that though 
we might have the power, we should not have the 
will, to consume them all in kind at home ; and the 
maintenance of our national wealth and revenue 
would depend entirely upon the circumstance whether 
the capital thrown out of the cotton trade could be 
so applied as to produce commodities which would 
be estimated as highly and consumed as eagerly as 
the fo Tign goods before imported. There is no magic 
in foreign markets. The final demand and consump- 
tion must always be at home ; and if goods could be 
produced at home, which would excite people to work 



3EC. V.] OF THE PROGRESS OF WEALTH. 319 

as many hours in the day, would communicate the 
same enjoyments, and create a consumption of the 
same value, foreign markets would be useless. We 
know however from experience, that very few coun- 
tries are capable of producing commodities of the 
same efficacy, in this respect, as those which may be 
obtained by a trade to various climates and soils. 
Without such a trade, and with a great increase in the 
power of production, there is no inconsiderable 
danger that industry, consumption, and exchangeable 
value would diminish ; and this danger would most 
unquestionably be realized if the cheapness of do- 
mestic commodities occasioned by machinery, were 
to lead to increased saving rather than to increased 
expenditure. 

But it is known that facilities of production have 
the strongest tendency to open markets, both at home 
and abroad. In the actual state therefore of most 
countries, there is little reason to apprehend any per- 
manent evil from the introduction of machinery. 
The presumption always is, that it wilLlead to a 
great extension of wealth and value. But still we 
must allow that the pre-eminent advantages derived 
from the substitution of machinery for manual labour, 
depend upon the extension of the market for the com- 
modities produced, and the increased stimulus given 
to consumption ; and that, without this extension of 
market and increase of consumption, they must be in 
a great degree lost. Like the fertility of land, the 
invention of good machinery confers a prodigious 
power of production. But neither of these great 
powers can be called fully into action, if the situation 
and circumstances, or the habits and tastes of the 
society prevent the opening of a sufficient market, 
and an adequate increase of consumption. 

The three great causes most favourable to produc- 
tion are, accumulation of capital, fertility of soil, and 
inventions to save labour. They all act in the same 
direction ; and as they all tend to facilitate supply. 



320 



ON THE IMMEDIATE CAUSES [CH. VII. 

without reference to demand, it is not probable that 
they should either separately or conjointly afford an 
adequate stimulus to the continued increase of wealth, 
which can only be kept up by a continued increase 
of the demand for commodities. 



SECTION VI. 

Of the Necessity of a Union of the Powers of Production with 
the Means of Distribution, in order to ensure a continued 
increase cf Wealth. 

We have seen that the powers of production, to 
whatever extent they may exist, are not alone suffi- 
cient to secure the creation of a proportionate degree 
ol wealth. Something else seems to be necessary in 
order to call these powers fully into action ; and this 
is, such a distribution of produce, and such an adapta- 
tion of this produce to the wants of those who are to 
consume it, as constantly to increase the exchange- 
able value of the whole mass. 

In individual cases, the power of producing par- 
ticular commodities is called into action, in proportion 
to the effective demand for them ; and the greatest 
stimulus to their production is a high market price, 
or an increase of their exchangeable value, before 
more capital and labour have been employed upon 
them. 

In the same manner, the greatest stimulus to the 
continued production of commodities, taken all 
together, is an increase in the exchangeable value of 
the whole mass, before more labour and capital have 
been employed upon them. And this increase of 
value is effected by such a distribution of the actual 
produce as is best adapted to gratify the existing 
wants of society, and to inspire new ones. 



SEC. VI.] OP TH£ PROGRE3S OF WEALTH. S21 

It has been stated in a preceding section, that if all 

S^ [ • J. he r hole ^ of the p f ° duce w °«i d 

great! v fall ; mdeed, ,t is obvious that if it were so 
distributed as not to be suited to the wants tastes 
and powers of the actual population in dTSntS' 
Uons, its value might sink to such a degree as to be 
comparatively quite inconsiderable. Upon the same 
principle, if the means of distributing the produce of 

adantaHn tr7 f Were f" f ' mher faci,itated > a « d " tte 
adaptation of it to the wants, tastes and powers of the 

ean hT rS 7T T 8 C ° m P lete than at present, there 
can be^ no doubt that a great increase in the value of 
thevvhole produce would follow. 

incre'4w ttZT e t he P° wer of distribution in 
increasing the mass of exchanged^ va l ue WP " 

only refer to experience. Before the introaltJo" oi 
good roads and canals in England, the prices of pro- 
duce m many country districts were extremely C 
compared with the same kind of produce in Z 

weTe fecilhafed'the^-" ^ n,an " rf dist " but ^ 

some sor s of f„ ? PnCe f C ° U "^ P roduce > and of 
some sorts of London produce which were sent into 

the country in exchange for it, rose ; and rose n a 

greater degree than the country produce fell in "he 

London markets, or the London produce fell in the 

country markets; and consequently the value of £ 
whole produce) or the ]ies J je 

SS2L2ES er ' T great,J increased ; and wh * e 

rZ tP f! m t ^ aS th , US S ,ven to the employment of 

demand t^f y °' CapUal ^ the exte ™on of 
rhTeSni tem V°™y rls ? of P ro fits, occasioned by 

d liiln Tl • ( W i 0U,d ? reat1 ^ ^tribute to furnish the 
iclilitional capital required. 

JL™" m ask ! d ' P erha P s ' how an "grease in the 
xchangeable value of the whole produce of a country 
so be estimated ? It has before been stated thS 
eal value m exchange, from its very nature, admits of 






322 



ON THE IMMEDIATE CAUSES [cH. VU 



no accurate and standard measure ; and consequently, 
in the present case, no measure can be mentmned 
which is perfectly satisfactory. Yet even bull on, 
our most common measure of value, ought, "gene 
ral, and for short periods, be referred to ; and though 
abstractedly considered, wealth is nearly ^penjn 
of monev : vet in the actual state of the relations ot 
tne I dS/conntries of the world with each other 
it rarely happens that any great increase or decrease 
n the^ulfton value of all the commodit.es of a 
country takes place, without an increase or decrease 
of demand for commodities, compared with the sup 

P y it°happSis however, undoubtedly, "*****££ 
the value of bullion alters, not only general y, but m 
particular countries i***£" *SS£*£i 

money-price of all its commodities. As the best 
approximation to a measure of real vain em exchange 
ir 1 amplication to the commodities of different coun- 
S and different times, I before proposed a mean 
between corn and labour ;* and to th» measure I 
should be disposed always to refer, when any com- 
modities are to be estimated, with the exception of 
corn and labour themselves. But as, in .speaking of 
tntional wealth, it is necessary to include the 
exchangeable vaue of food ; and as food cannot well 
be the measure of food, I shall refer generally to the 
tabour domestic and foreign, which the bulhon-pnce 
ofThe produce will command, or the sacrifices winch 
peopled willing and able to make of their own or 
other persons exertions in order to obtain it, as the 
St practical measure of value that can be applied, 
and 1 lough undoubtedly not accurate, yet suffiaentlv 
so for the present purpose. 



* Chap. li. icci. vii. 



SEC. VI.] OF THE PROGRESS OF WEALTH. 323 

General wealth, like particular portions of it, will 
always follow effective demand. Whenever there is 
a great demand for commodities, that is, whenever the 
exchangeable value of the whole mass will command 
more labour than usual at the same price, there is the 
same kind of reason for expecting a general increase 
of commodities, as there is for expecting an increase 
of particular commodities when their market-prices 
rise. And on the other hand, whenever the produce 
of a country estimated in the labour which it will 
command, falls in value, it is evident that with it the 
power and will to purchase the same quantity of 
labour must be diminished, and the effective demand 
for an increase of produce must, for a time, be check- 
ed. 

Mr. Ricardo, in his chapter on Value and Riches, 
has stated that "a certain quantity of clothes and 
provisions will maintain and employ the same num- 
ber of men, and will therefore procure the same quan- 
tity of work to be done, whether they be produced 
by the labour of a hundred or of two hundred men ; 
but they will be of twice the value, if two hundred 
have been employed in their production."* But, 
even taking his own peculiar estimate of value, this 
statement would very rarely indeed be true. The 
clothes and provisions which had cost only one hun- 
dred days' labour would never, but in the most un- 
natural state of things, be able to procure the same 
quantity of work to be done as if they had cost two 
hundred days' labour. To suppose it, is to suppose 
that the price of labour, estimated in necessaries, is 
the same at all times and in all countries, and does 
not depend upon the plenty or scarcity of necessaries 
compared with labour, a supposition contradicted by 
universal experience. Nine quarters of wheat will 
perhaps command a year's labour in England ; but 
sixteen quarters will hardly procure the same quantity 

*Prin<\ of Polit. Econ. cb. xx. p. 349. 



324 ON THE IMMEDIATE CAUSES [CH. VII. 

of work to be done in America. And in the case 
either of a sudden increase of productive labour, bv 
a rapid conversion of revenue into capital, or a sud- 
den increase of the productiveness of the same quan- 
tity of labour, there is not the slightest doubt that a 
given portion of necessaries would be quite unable to 
set in motion the same quantity of labour ; and, if 
the exchangeable value of the produce should fall m 
a greater ratio than its quantity increases, (which 
may very easily happen,) then the same quantity ot 
labour would not be set in motion by the increased 
quantity of necessaries, and the progress of wealth 
would receive a decided check. 

Such a check would still more obviously be the 
consequence of a diminished demand for produce, 
owing to the decline of foreign commerce, or any 
other cause. Under these circumstances, both the 
quantity and value of produce would soon be dimi- 
nished ; and though labour, from the want of demand, 
would be very cheap, the capitalists would soon lose 
both the will and the power to employ it in the same 
quantity as before. m ^ 

In every case, a continued increase in the value ot 
produce estimated in labour seems to be absolutely 
necessary to a continued and unchecked increase or 
wealth ; because without such an increase of value it 
is obvious that no fresh labour can be set in motion. 
And in order to support this value, it is necessary that 
an effective distribution of the produce should take 
place, and a due proportion be maintained between 
the objects to be consumed and the number, wants, 
and powers of the consumers, or, in other words, 
between the supply of commodities and the demand 

for them. . 

It has already been shewn that this value cannot 
be maintained in the case of a rapid accumulation of 
capital occasioned by an actual and continued dimi- 
nution in the expenditure and consumption of the 



I SEC. VI.] OF THE PROGRESS OF WEALTH. 325 

cankaTisl, tf ? f amg fr ° m revenue t0 *M to 

of P wea Id, Hn ' I 6 ' 3, ""^ Ste P in the P™g«*» 
ot wealth. How then is this saving to take olare 

hend°ed? ^"^ ^ dJmi,,u,iM ° f value a^! 

dJ« EE 'f 6 p ' aCe ' and P racti cally almost always 
does ake place, ,n consequence of a previous increase 
of value, or of revenue, in which case a saving 1 be 

cousumpt on, but under an actual increase of demand 

ce°" u Td on t and va f ,ue d . uring ™y p art of ^ p" : 

cess. And it is m fact this prev ous increase of vLc 

accumulation, and makes that accumulation effective 
in the continued production of wealth. . 

M. fcismondi, in his late work, speaking of the lim- 
its of accumulation, observes, § 

«J?a "?• fal V a !? a ' S * pr * s tout q»'echanger la halite I, 

&; T £i:z, % contre ,a totaiit * L ,a r*^ * 

sa J h™ tE? re . reall J u he Case ' h would be difficult to 

increased S ? f^' """""^ P -° duCe C0U,d wer be 
increased. But in fact a great increase of produc- 
tions may immediately fi„d\n adequate market and 
experience consequently a great increase of exchange 

*Sect. HI. of this chapter. 

t Nouveaux Principe* d'Eeonomie Politique, torn i „ 120 I „. •♦ 
M. Sisruoiidi m many of his princiol^ r«nli„. * P * ' ^"' tc a S re * *'i f b 

do not think that the view SSS^SS^Sif f nsum P t,on ™ d demand; but! 
which all increase of column Uo n .i im i ! 'onnat.on of nation,! revere, or 

the ■ o* • , Q which hp h0]ds f -^ -{ ch he «p™« about machinery, and etfH lei in 
P art government to protect yivllTj 'T*" 1 ,nt "ference on the 

«» n F on. H itb regard toLn^ont h • a8S ? S ' fr °' n ,he «**H««i of 
1 «*i ave ex P cc:ed from so^Se arT/l^ • T'!l !nde,stcod "'^ ™* ^re Hup 
reaso, \ 9 ocmp!etely soph Iv, h" dwt, I D |f u,,,hed * ""iter He says, that my 
P°p U ' « .itb the AS iJcSJ'Sf^ ' h p V6 C ° mp , ared tb€ «**«' Urease of 
<u«* ncrease of population tiththf T*' But s,,rel ? ' have compared the t>ir- 
of opulation wft b P X S nc^ XT" °i ^ 5 a " d the "^ ""^ 
-f ken up with the 'alter coTp"^ of my book 

tk . I do in Ins apprehensions of a m i„„!Jl^ 5 . ^ S,sm , oudl goes much f3i <^' 
by II sorts of strange means I LU f d ! ,ndant population, and prop osec to repress it 
fueans than those of exEL toteuT ^T^^' «* evir « b all, any other 
wte.^ts are affected, by too JrWt .n ". ,abounn S r c, « 8 *» *»»' »'*»»« in which their 
weakening the p ,itive , aw Vwh^ht ^ C ? as f- 0f t hci ' nUt "ber 8 , and of removing or 
f U poiuive la We which tend to discourage habits of prodence andfoi£ 



326 ON THE IMMEDIATE CAUSES [CH. VII. 

able value, if they are so well distributed and so well 
adapted to the tastes and wants of the society as to 
excite the desire of making an adequate sacrifice in 
order to procure and consume them. All increase ot 
commodities shews itself first in increased revenue ; 
and as long as they increase in value as well as m 
quantity by being properly distributed and the con- 
sumption properly proportioned to the supply, it is 
obvious that a yearly saving may take place consis- 
tently with a yearly increase of revenue and a yearly 
increase of expenditure and demand. 

The fortune of a country, though necessarily made 
mo-e slowly, is made in the same way as the fortunes 
of individuals in trade are generally made,— by sav- 
ings, certainly ; but by savings which are furnished 
from increased gains, and by no means involve a 
dimir Jshed expenditure on objects of luxury and en- 

joyme \ , ', ' 

M .y a merchant has made a large fortune, although, 

during the acquisition of this fortune, there was per- 
haps hardly a single year in which he did not rather 
increase than diminish his expenditure in objects of 
luxury, enjoyment, and liberality. The amount of 
capital in this country is immense, and it certainly 
received very great additions during the last twenty- 
five years; but on looking back, few traces are to be 
found of a diminished expenditure in the maintenance 
of unproductive labour. If some such traces however 
are to be found, they will be found in exact conformi- 
tv to the theory here laid down ; they will be found 
during a period, when, from particular circumstances, 
the value of the national produce was not mainti -d, 
and there was in consequence a great dirmnuti* °i 
the power of expenditure, and a great check t d 
production of wealth. 

Perhaps it will be said, that to lay so much stre s 
on distribution, and to measure demand by the e, - 
changeable value of the whole produce, is to exalt the 
gross revenue at the expense of the neat revenue of a 



3EC. VI.] OF THE PROGRESS OF WEALTH. 327 

country, and to favour that system of cultivation and 
manufacturing which employs on each object the 
greatest number of hands. But I have already shewn 
that the saving of labour, and the increase of skill, 
both in agriculture and manufacturing industry, by 
enabling a country to push its cultivation over poorer 
lands, without diminution of profits, and to extend far 
and wide the markets for its manufactures, must tend 
to increase the exchangeable value of the whole ; and 
there cannot be a doubt that in this country they must 
have been the main sources of that rapid 'and aston- 
ishing increase in the value of the national wealth, 
which has taken place during the last thirty or forty 
years. 

To dwell therefore mainly on the gross revenue of 
a country rather than on its neat revenue, is in no 
respect to under-rate the prodigious advantage derived 
from skill and machinery, but merely to "give that 
importance to the value of the whole produce to 
which it is so justly entitled. No description of 
national wealth, which refers only to neat revenue 
can ever be in any degree satisfactory. The Econo- 
mists destroyed the practical utility of their works by 
referring exclusively to the neat produce of the land. 
And the writers who make wealth consist of rents and 
profits, to the exclusion of wages, commit an error 
exactly of the same kind though less in degree. Those 
who live upon the wages of labour, unproductive as 
well as productive, receive and expend much the 
greatest part of the annual produce, pay a very con- 
siderable sum in taxes for the maintenance of the 
government, and form by far the largest portion of its 
physical force. Under the prevalence of habits of 
prudence, the whole of this vast mass might be nearly 
as happy as the individuals of the other two classes 
and probably a greater number of them, though not 
a greater proportion of them, happier. In every point 
of view therefore, both in reference to the part of the 
annual produce which falls to their share, and the 



328 ON THE IMMEDIATE CAUSES [CH. VII. 

means of health and happiness which it may be pre- 
sumed to communicate, those who live on the wages 
of labour must be considered as the most important 
portion of the society ; and any definition of wealth 
which should involve such a diminution of their num- 
bers, as to require for the supply of the whole popula- 
tion a smaller annual produce, must necessarily be 
erroneous. 

In the First Chapter of this Work, having defined 
wealth to be " the material objects which are necessa- 
ry, useful, and agreeable to mankind," I stated as a 
consequence that a country was rich or poor accord- 
ing to the abundance or scantiness in which these 
objects were supplied, compared with the extent of 
territory. It will be readily allowed that this defini- 
tion does not include the question of what may be call- 
ed the amount of disposable produce, or the fund for 
taxation ; but still I must consider it as a much more 
correct definition of the wealth of a country than any 
that should refer to this disposable part alone. What 
should we say of the wealth of this country, if it were 
possible that its rents and profits could remain the 
same, while its population and produce were reduced 
two-thirds ? Certainly it would be much poorer 
according to the above definition ; and there are not 
many that would dissent from such a conclusion. 

That it would be desirable, in a definition of nation- 
al wealth, to inelude the consideration of disposable 
produce, as w T ell as of actual quantity and value, can- 
not be doubted ; but such a definition seems to be in 
its nature impossible, because in each individual case 
it must depend upon opinion, what increase of disposa- 
ble produce should be accounted equivalent to a given 
diminution of gross produce. 

We must content ourselves therefore with referring 
generally to the amount and value of national pro- 
duce ; and it may be subsequently stated as a sepa- 
rate, though very important consideration, that par- 
ticular countries, with the same amount and value of 



3EC. VI.] OF THE PROGRESS OF WEALTH. 

produce, have a larger or smaller proportion of that 
produce disposable. In this respect, no doubt, a 
country with a fertile territory will have a prodigious 
advantage over those whose wealth depends almost 
entirely on manufactures. With the same popula- 
tion, the same rate of profits, and the same amount 
and value of produce, the landed nation would have 
much the largest portion of its wealth disposable. 

Fortunately, it happens but seldom that we have 
to determine the amount of advantage or disadvantage 
occasioned by the increase of the neat, at the expense 
of the gross revenue. The inter-st of individual 
capitalists uniformly prompts them to the saving of 
labour, in whatever business they are engaged ; and 
both theory and experience combine to shew that 
their successful efforts in this direction, by increasing 
the powers of production, afford the means of increas- 
ing, in the greatest practicable degree, the amount 
and value of the gross produce,* provided always 
that such a distribution and consumption of the 
increased supply of commodities takes place, as con- 
stantly to increase their exchangeable value. 

In general, an increase of produce and an increase 
of value go on together ; and this is that natural and 
healthy state of things, which is most favourable to 
the progress of wealth. An increase in the quantity 
of produce depends chiefly upon the power of pro- 
duction, and an increase in the value of produce upon 

* From what has been here said, the reader will see that 1 can by no means a^ree 
witli Mr. K^ardo, ln his chapter on Gross and Net Revenut. I should not hesitate 
rt '" oment .'» saying, that a country with a neat revenue from rents and profits, con- 
ing of lood and clothing for five millions of men, would be decidedly richer and 
more powerful, if such neat revenue were obtained from seven millions of men, 
rawer than five, supposing them to be equally well supported. The whole produce 
would be greater ; and the additional two millions of labourers would some of them 
unquestionably have a part of their wages disposable. But I would further ask 
wnat is to become of the capital as well as the people in the case of such a change ? 
M is obvious that a considerable portion cf it must become redundant and useless. I 
quite agree with Mr. Ricardo, however, in approving all saving of labour and inven- 
tions irr machinery ; but it is because 1 think that their tendency is to increase the 
ftross produce and to make room for a larger population and a larger capital. If 
tiie saving o. labour were to be accompanied by the effects stated iu Mr. Ricardo's 
instance, I should agree with M. Sismondi and Mr. Owen in deprecating it as a 
great misfortune. ' &<•««« 

42 



330 ON THE IMMEDIATE CAUSES [CH. VII. 

its distribution. Production and distribution are the 
two grand elements of wealth, which, combined in 
their due proportions, are capable of carrying the 
riches and population of the earth in no great length 
of time to the utmost limits of its possible resources ; 
but which taken separately, or combined in undue 
proportions, produce only, after the lapse of many 
thousand years, the scanty riches and scanty popula- 
tion, which are at present scattered over the face of 
the globe. 



SECTION VII. 

Of the Distribution occasioned by the Division of landed 
Property considered as the means of increasing the ex- 
changeable Value of the whole Produce, 

The causes most favourable to that increase of value 
which depends upon distribution are, 1st, the division 
of landed' property ; 2dly, internal and external com- 
merce ; 3dly, the maintenance of unproductive con- 
sumers. 

In the first settlement and colonization of new 
countries, an easy division and subdivision of the land 
is a point of the very highest importance. Without 
a facility of obtaining land in small portions by those 
who have accumulated small capitals, and of settling 
new proprietors upon the soil, as new families branch 
off from the parent stocks, no adequate effect can be 
given to the principle of population. This facility of 
settling the rising population upon the soil is still 
more imperiously necessary in inland countries, which 
are not favourably situated for external and internal 
commerce. Countries of this description, if, from 
the laws and customs relating to landed property, 
great difficulties are thrown in the way of its distri- 



SEC. VII.] OF THE PROGRESS OF WEALTH. 331 

bution, may remain for ages very scantily peopled, in 
spite of the principle of population ; while the easy 
division and subdivision of the land as new families 
arise to be provided for, might, with comparatively 
little commerce, furnish an effective demand for popu- 
lation, and create a produce which would have no 
inconsiderable value in exchange. Such a country 
would probably have a small neat produce compared 
with its gross produce ; it would also be greatly defi- 
cient in the amount of its manufactures and mercan- 
tile products ; yet still its actual produce and popula- 
tion might be respectable ; and for the increase of 
exchangeable value which had produced these effects, 
it would be mainly indebted to that distribution of 
the produce which had arisen from the easy division 
of land. 

The rapid increase of the United States of America, 
taken as a whole, has undoubtedly been aided very 
greatly by foreign commerce, and particularly by the 
power of selling raw produce, obtained with little 
labour, for European commodities which have cost 
much labour. But the cultivation of a great part of 
the interior territory has depended in a considerable 
degree upon the cause above stated ; and the facility 
with which even common workmen, if they were 
industrious and economical for some years, could 
become new settlers and small proprietors of land, 
has given prodigious effect to that high money price 
of labour, which could not have taken place without 
ioreign commerce; and together they occasioned 
yearly that extraordinary increase of exchangeable 
value, which has so distinguished the progress of the 
establishments in North America, compared with any 
others with which we are acquainted. 

Over almost all Europe a most unequal and 
vicious division of landed property was established 
during the feudal times. In some states the laws, 
which protected and perpetuated this division, have 
been greatly weakened, and by the aids of commerce 
and manufactures have been rendered comparatively 



332 ON THE IMMEDIATE CAUSES [CH. \11. 

inefficient. But in others these laws still remain in 
great force, and throw very great obstacles in the 
way of increasing wealth and population. A very 
large proprietor, surrounded by very poor peasants, 
presents a distribution of property most unfavourable 
to effective demand. 

Adam Smith has well described the slack kind of 
cultivation which was likely to take place, and did 
in fact take place, among the great proprietors of the 
middle ages. But not only were they bad cultivators 
and improvers ; and for a time perhaps deficient in a 
proper taste for manufactured products ; yet, even if 
they had possessed these tastes in the degree found to 
prevail at present, their inconsiderable numbers would 
have prevented their demand from producing any im- 
portant mass of such wealth. We hear of great 
splendour among princes and nobles in every period 
of history. The difficulty was not so much to in- 
spire the rich with a love of finery, as to break down 
their immense properties, and to create a greater 
number of demanders who were able and willing to 
purchase the results of productive labour. This, it 
is obvious, could only be effected very gradually. 
That the increasing love of finery might have assisted 
considerably in accomplishing this object is highly 
probable ; but these tastes alone, unaccompanied by 
a better distribution of property, would have been 
quite inefficient. The possessor of numerous estates, 
after he had furnished his mansion or castle splendidly, 
and provided himself with handsome clothes and 
handsome carriages, would not change them all every 
two months, merely because he had the power of 
doing it. Instead of indulging in such useless and 
troublesome changes, he would be more likely to 
keep a number of servants and idle dependants, to 
take lower rents with a view of having a greater 
command over his. tenants, and perhaps to sacrifice 
the produce of a considerable portion of his land in 
order to encourage more game, and to indulge, with 



SEC. VII.] OF THE PROGRESS OF WEALTH. 333 

more effect and less interruption, in the pleasures of 
the chase. Thirty or forty proprietors, with incomes 
answering to between one thousand and five thousand 
a year, would create a much more effective demand 
for wheaten bread, good meat, and manufactured 
products, than a single proprietor possessing a hundred 
thousand a year. 

It is physically possible indeed for a nation, with a 
comparatively small body of very rich proprietors, 
and a large body of very poor workmen, to push 
both the produce of the land and manufactures to 
the greatest extent, that the resources and ingenuity 
of the country would admit. Perhaps under such a 
division of property the powers of production might 
be rendered the greatest possible ; but, in order to call 
them forth, we must suppose a passion among the 
rich tor the consumption of manufactures, and the 
results of productive labour, much more excessive 
lhan has ever been witnessed in human society. And 
the consequence is, that no instance has ever been 
known of a country which has pushed its natural 
resources to a great extent, with a small proportion- 
ate body of persons of property, however rich and 
uxunous they might be. Practically it has always 
been found that the excessive wealth of the few is in 
no respeet equivalent, with regard to effective demand 
to the more moderate wealth .of the many. A large 
body of manufacturers and merchants can only find a 
market for their commodities among a numerous 
class of .consumers above the rank of mere workmen 
and labourers. And experience shews us that manu- 
facturing wealth is at once the consequence of a bet- 
ter distribution of property, and the cause of further 
improvements in such distribution, by the increase in 
the proportion of the middle classes of society, which 
the growth of manufacturing and mercantile capital 
cannot fail to cr^t* r 



But though it be true that the division of landed 
property, and the diffusion of manufacturing and 



334 ON THE IMMEDIATE CAUSES [CH. VII. 

mercantile capital to a certain extent, are of the ut- 
most importance to the increase of wealth ; yet it is 
equally true that, beyond a certain extent, they would 
impede the progress of wealth as much as they had 
before accelerated it. There is a certain elevation at 
which the projectile will go the farthest ; but if it be 
directed either higher or lower, it will fall short. With 
comparatively small proportion of rich proprietors, 
who would prefer menial service and territorial influ- 
ence to an excessive quantity of manufactured and 
mercantile products, the power of supplying the 
results of productive labour would be much greater 
than the will to consume them, and the progress of 
wealth would be checked by the want of effective 
demand.* With an excessive proportion of small 
proprietors both of land and capital, all great im- 
provements on the land, all great enterprizes in com- 
merce and manufactures, and all the wonders de- 
scribed by Adam Smith, as resulting from the division 
of labour, would be at an end ; and the progress of 
wealth would be checked by a failure in the powers 
of supply. 

It will be found, I believe, true that all the great 
results in political economy, respecting wealth, depend 
upon proportions ; and it is from overlooking this 
most important truth, that so many errors have 
prevailed in the prediction of conseauences ; that 
nations have sometimes been enriched when it was 
expected that they would be impoverished, and im- 
poverished when it was expected that they would be 
enriched ; and that such contradictory opinions have 
occasionally prevailed respecting the most effective 
encouragements to the increase of wealth. But 
there is no part of the whole subject, where the ef- 
ficacy of proportions in the production of wealth is 

* It is perhaps just possible to conceive a passion for menial service, which would 
stimulate landlords to cultivate lands in the best way, in order to support the great- 
est quantity of such attendants. This would be the same thing as the pasnon for 
population adverted to in a former section. Such a passion, to the extender e sup- 
posed, may be possible; but scarcely any supposition can be less probable. 



3EC. Vfl.] OF THE PROGRESS OF WEALTH. 335 

so strikingly exemplified, as in the division of landed 
and other property ; and where it is so very obvious that 
a division to a certain extent must be beneficial, and 
beyond a certain extent prejudicial to the increase of 
wealth. 

On the effects of a great sub-division of property, 
a fearful experiment is now making in France. The 
law of succession in that country divides property of 
all kinds among all the children equally, without right 
of primogeniture or distinction of sex, and allows 
but a small portion of it to be disposed of by will. 
This law has not yet prevailed long enough to shew 
what its effects are likely to be on the national wealth 
and prosperity. If the state of property in France 
appears at present to be favourable to industry and 
demand, no inference can thence be drawn that it will 
be favourable in future. It is universally allowed 
that a division of property to a certain extent is 
extremely desirable ; and so many traces yet remain 
almost all over Europe of the vast landed possessions 
which have descended from the feudal times, that 
there are not many states in which such a law as that 
of France might not be of use, with a view to wealth, 
lor a certain number of years. But if such a law 
were to continue permanently to regulate the descent 
of property m France ; if no modes of evading it 
should be invented, and if its effects should not be 
weakened by the operation of an extraordinary degree 
of prudence in marriage, which prudence such a law 
would certainly tend to discourage, there is every 
reason to believe that the country, at the end of a 
century, will be quite as remarkable for its extraor- 
dinary poverty and distress, as for its unusual equali- 
ty ol property. The owners of the minute divisions 
ot landed property will be, as they always are, pecu- 
liarly without resource, and must perish in great num- 
bers in every scarcity. Scarcely any will be rich 
but those who receive salaries from the government 



336 ON THE IMMEDIATE CAUSES [CH. VII. 

In this state of things, with little or none of the 
natural influence of property to check at once the 
power of the crown and the violence of the people, 
it is not possible to conceive that such a mixed gov- 
ernment as France has now established can be main- 
tained. Nor can 1 think that a state of things, in 
which there would be so much poverty, could be 
favourable to the existence and duration of a repub- 
lic. And when, in addition to this, we consider how 
extremely difficult it is, under any circumstances, to 
establish a well-constituted republic, and how dread- 
fully the chances are against its continuance, as the 
experience of all history shews ; it is not too much 
to say, that no well-grounded hope could be enter- 
tained of the permanent prevalence of such a form of 
government. 

But the state of property above described would 
be the very soil for a military despotism. If the 
government did not adopt the Eastern mode of con- 
sidering itself as sole territorial proprietor, it might 
at least take a hint from the Economists, and declare 
itself co-proprietor with the landlords, and from this 
source, (which might still be a fertile one, though the 
landlords, on account of their numbers, might be 
poor,) together with a few other taxes, the army might 
easily be made the richest part of the society ; and 
it would then possess an overwhelming influence, 
which, in such a state of things, nothing could oppose. 
The despot might now and" then be changed, as 
under the Roman emperors, by the Praetorian guards ; 
but the despotism would certainly rest upon very solid 
foundations. 

It is hardly necessary to enter into the question, 
whether the wealth of the British empire would be 
essentially increased by that division of landed pro- 
perty which would be occasioned by the abolition ot 
the right of primogeniture, and the law of entails, 
without any interference with testamentary disposi- 
tions. It is generally acknowledged that the coun- 






VII.] OF THE PROGRESS OF WEALTH. 337 

try, in its actual state and under its actual laws, pre- 

nts a picture of greattr wealth, especially when 

compared with its natural resources, than any large 

territorial state of modern time By the natural 

x nct.on of some great familk md the natural 
imprudence of some others, but, a,,. 2 all, by the 
extraordinary growth of manufactures and commerce, 
the immense landed properties which formerly pre- 
vailed all over the country have been in a gr-^at degree 
broken down, notwithstanding the right of primoge- 
niture. And the few which remain may pef ;ap S S be 
of use in furnishing motives to the merch; tf and 
master-manufacturer to continue the exercise c their 
>kill and powers till they have acquired larg« cautals, 

^"a ""?- *? COntend in wealth wit/the 'g.ea 
landlords. I . from the abolition of the right of prir ,o- 
geniture, the landed fortunes were all very inconsde- 
r-We, it is not probable that there would be i.mny 

mnfh W *■ am ° ng mclcI,an «; ^d in thfe case, \ 

much productive powe would unquestionabb be lost ' 

large bodT e f er '?* A} \ ■*' k is certain inat a v *ry ; 

of g soeSv°h V Amy be Ca,led the - ' ;dle <*»*£ I 

whl ?. J r ?n est ablished ".. .his country • ! 

while the right ,. pw.-ogaauure, by forcing {he 
younger sons of the nobility and great landed p™ ri- 
etors into the h.gher divisions of these classe Ta 
all practical purposes, annihilated the destinations 
unded on rank and birth, and opened the fairest 
na for the contests of personal merit in a I the 
avenues to wealth and honours. It is piolable t „at 
< he obligation generally imposed upon younger sons 

^reJter T^ ' f ** ° VV " *"«* hafSfS 
ea,e degree of energy and activity into profes- 

-en place if property in land had been more equal- 

iss of A 7^ her ^ the co r r y p°~ - -4 

ar s e class of effective demanders, who derive their 
power of purchasing from the various profesJonT 
fem commerce, from manufactures, from P wholesale 






338 ON THE IMMEDIATE CAUSES [CH. VII 

and retail trade, from salaries of different kinds, and 
from the interest of public and private debts ; and 
these demanders are likely, perhaps, to acquire tastes 
more favourable he encouragement of wealth than 
the owners of s properties on the land- 

Under thei. circumstances, which, to the extent in 
which they prevail, it must be allowed are almost 
peculiar t/thfs country, it might ; be . «A * «»JJ 
that the nation would be richer if the nght of primo- 
geniture were abolished. . But even if we were ab e 
to detc .nine the question in the affirmative i .would 
by no neans determine the policy of such a change. 
In a' oases of this kind there are higher considera- 
tion, to be attended to than those which relate to 

mere wealth. 

It is an historical truth which cannot for a moment 
be disputed, that the first formation, and subse- 
queit preservation and improvement, of our present 
const,, ition, and of the liberties and privileges which 
have so long distinguished .^glishmen, are mam j 
due to a landed aristocracy. id we are jerta ml) 
not yet w. -ted by any expert - to conclude that 
without an .... -icy, which *< «£?# *? 

supported in an effective A** h .. oy the law of pn- 
mo P g P e°mture, the constitution and liberties so exil- 
ed can be in future maintained. If then we seta 
value upon the British Constitution ; ,f we think that 
whatever may be its theoretical imperfections, it has 
practically given a better government and more 
bberty to a greater mass of people for a longer time 
than any which history records it would be most 
unwise to venture upon any such change as would 
rbk the whole structure, and throw us upon aw.de 
sea of experiment, where the chances are so dread- 
uUy against our attaining the object ofour ^search 

It is not perhaps easy to say to what extent the 
abolition of the law of primogeniture and en t alk 
would divide the landed property of *» counO^l 
the power of testamentary bequest were left untouch 



SEC. VII.] OF THE PROGRESS OF WEALTH. 33d 

ed, it is possible that past habits might still keep 

aT{h!f f e V° gethel ' f ° r a time ; but th " Probabilities 
are, that by degrees a considerable subdivision of land 
would take place ; and if there were few estates of 
above a thousand a year, the mercantile classes would 
either be induced to moderate their exertions in the 
acquisition of wealth, from the absence of the mot ve 
of competition with the landlords, as I stated abovl 
or, if the merchants and manufacturers vere still to 
acquire great wealth, excited either by a compe on 
with each other or by political ambition, twCS 

in he ° s Se PerSOn / "I* 10 C0U,d P ° SSeSS Z™ ^n- 
m the state; and the government of the country 

c"" prtbab v ° St t° lly int ° thdr hands - 2 
ta£d P I t t T Ud T ?r T nt constk ^on be main- 
tained, in the first, where the property of individuals 

"s" wo:id be n rh Si<, r? e ' and Au J al, t^tendl 
S w^tl tS 11 t0 dem ? cracv OT miliary despo- 
twn, with the chances greatly in favour of the latter 
And ,n the second case, whatever might be the form 

wou!d° V hT m r' ^ ^ rchants and ™* ~ 
would have the greatest influence in its councils ; and 

it is justly observed by Adam Smith, that the interests 
of these classes do not always prepare them to give 
the most salutary advice. i"gne 

tion 1 i°l g V^ ref0re !t be true that a bette r "istribu- 
actuaHv "f d f r0pert !. mi S ht ex ^ than that which 

althou/ h Th 3 . m ttUS u C ° Untr ^ at P resent ' «nd 
although it be also true, that to make it better fh P 

distribution should be more equal : ye i ma bvt 

TrSr n "nlhf ^ * '^ t0 a M ™™ of land 
§ h ^ weakh A " W ° Uld J* faTOUra ^ even to 
wo„lH hi • C0Unt , r ^ ; and S reater eertainly than 

rite to r nS,Stent ^ lth those higher interests, which 
relate to the protection of a people equally from the 

-Fanny of despotic rulers, an'd th P e fury of J a despotic 






340 ON THE IMMEDIATE CAUSES [cH- Vtl. 

But, whatever conduct the wisdom and policy of "a 
WUlature may dictate respecting the laws ot succes 
Sfn the princU will still be true, that the division 
of knS P pro P Trty is one of the great means of the 
d LS1 P « P wealth, Jhich -ds^o keep UP - 
•,,. rpw it s exchangeable value, and to encourd & t, 
fnrthe Production ; and that the distribution so occa- 
• IS liU as it extends, continue to produce a more 
CnraWe effect wealth, till it meets its antago- 
^ f^rinlirfe and begins to interfere with the power 
TpSS. Thi?wiU take place sooner or lamr 

the man effect Seinanders besides the landlords 
ftlmTeoa^be great - ^ependently of t be - d ^ 

^r^htbiti 1 S M com unions £ 
such as not to encourage an active home trade nolh 
i„g can occasion an adequate de ™*nd for produc^ 
but an easy subdivision of landed property ; ^J™\ 
on such asubdivision, a country with great nam a 
resources might slumber for ages w. th .an uncult.v atec 
soil, and a scanty yet starving population. 



SECTION VIII- 

Of the Distribution occasioned by Commerce, ^Urnatmd 
0f external, considered as the Means of »«**»>* ^ 
changeable Value of Produce. 

The second main cause favourable to that increase 
If exchangeable value, which depends upon distribu- 
tion, is internal and external commerce. 



SEC. VIII.] OF THE PROGRESS OF WEALTH. 341 



Every exchange which takes place in a country, 
effects a distribution of its produce better adapted to 
the wants of the society. It is with regard to botli 
parties concerned, an exchange of what is wanted less 
for what is wanted more, and must therefore raise the 
value of both the products. If two districts, one of 
which possessed a rich copper mine, and the other a 
rich tin mine, had always been separated by an im- 
passable river or mountain, there can be no doubt that 
on the opening of a communication, a greater demand 
would take place, and a greater price be given both 
for tin and copper ; and this greater price of both 
metals, though it might only be temporary, would 
alone go a great way towards furnishing the addition- 
al capital wanted to supply the additional demand ; 
and the capitals of both districts, h>e%\ the products of 
both mines, would be increased both in quantity and 
value to a degree which could not have taken place 
without this new distribution of the produce, or some 
event equivalent to it. 

The Economists, in their endeavours to prove the 
unproductive nature of trade, always insisted that the 
effect of it was merely to equalize prices, which were 
in some places too high and in others too low, but in 
their amount the same as they would be after the 
exchange had taken place. This position must be 
considered as unfounded, and capable of being contra- 
dicted by incontrovertible facts. The increase of 
price at first, from the extension of the market, is 
unquestionable. And w r hen to this we add the effect 
occasioned by the demand for further produce, and 
the means thus afforded of rapid accumulation for the 
supply of this demand, it is impossible to doubt for a 
moment the direct tendency of all internal trade to 
increase the value of the national produce. 

If indeed it did not tend to increase the value of the 
national produce, it would not be carried on. It is 
out of this increase that the merchants concerned are 
paid ; and if some London goods are not more valued 



342 ON THE IMMEDIATE CAUSES [CH. VII. 

in Glasgow than in London, and some Glasgow goods 
more valued in London than in Glasgow, the mer- 
chants who exchange the articles in which these towns 
trade, would neither be doing themselves any good, 
nor any one else. It is a mere futile process to ex- 
change one set of commodities for another, if the par- 
ties, after this new distribution of goods has taken 
place, are not better off than they were before. 1 he 
ffivine one article for another has nothing to do with 
effectual demand, unless the commodity received so 
far exceeds in value the labour employed on the com- 
modity parted with, as to yield adequate profits to the 
capitalists concerned, and to give them both the pow- 
er and the will to set fresh labour to work in the same 

"taas been sq*? that the industry of a country is 
measured by the extent of its capital, and that the 
manner in which this capital is employed, though ,t 
may make some difference to the enjoyment of he 
^habitants, makes very little in the value of the 
national revenue. This would be true on one suppo- 
Sion, and on one supposition only ; namely, that the 
inhab tants could be persuaded to estimate their con- 
fined productions just as highly, to be as eager to 
obtain and consume them, and as willing to work 
har d for them, and to make great sacrifices for them, 
as for the commodities which they obtain from a 
distance. But are we at liberty to make such a sup- 
position ? It is specifically to overcome the want of 
eagerness to purchase domestic commodities that the 
Shant exchanges them for others more m request. 
Could we but so liter the wants and tastes of the peo- 
ple of Glasgow as to make them estimate as highly 
Se profusion of cotton goods wh ch they produce, a, 
anv articles which they could receive in return for them 
Ser a prosperous trade, we should hear no more ot 
their distresses. It may be allowed that the quantity 
of productive industry maintained in a country is near- 
ly SSned to the quantity of capital employed .; 



SEC. VIII.] OF THE PROGRESS OF WEALTH. 343 

but the value of the revenue will be greater or less 
according to the market prices of the commodities pro- 
duced. These market prices must obviously depend 
•upon the interchange of goods ; and consequently the 
value of the revenue, and the power and will to 
increase it, must depend upon that distribution of com- 
modities which best adapts them to the wants and 
tastes of the society. 

The whole produce of a nation may be said to have 
a market price in money and labour. When this 
market price is high, that is, when the prices of com- 
modities rise so as to command a greater excess of 
labour above what they had cost in production than 
before, while the same capital and number of people 
had been employed upon them, it is evident that more 
fresh labour will be set in motion every year, and the 
increase of wealth will be certain and rapid. On the 
other hand, when the market prices of commodities 
are such as to be able to command very little more 
labour than the production of them has cost, it is as 
evident that the national wealth will proceed very 
slowly, or perhaps be quite stationary. 

In the distribution of commodities, the circulating 
medium of every country bears a most important part : 
and, as I intimated before in a note, we are much more 
likely to obscure our reasonings than to render them 
clearer, by throwing it out of our consideration. It 
is not easy indeed, without reference to a circulating 
medium, to ascertain whether the commodities of a 
country are so distributed as to give them their proper 
value. 

It may be said, perhaps, that if the funds for the 
maintenance of labour are at any time in unusual 
abundance, it may fairly be presumed that they will 
be able to command a more than usual quantity of 
labour. But they certainly will not be able to com- 
mand more labour, nor even so much, if the distribu- 
tion of them be defective ; and in a country which has 
a circulating medium, the specific proof of the dis- 



344 ON THE IMMEDIATE CAUSES [CH. VII. 

tribution being defective is, that the whole produce 
does not exchange for so large an amount of circulat- 
ing medium as before, and that consequently the pro- 
ducers have been obliged to sell at a great diminution 
of money profits, or a positive money loss. 

From the harvest of 1815 to the harvest of 1816, 
there cannot be a doubt that the funds for the mainte- 
nance of labour in this country were unusually abun- 
dant. Corn was particularly plentiful, and no other 
necessaries were deficient ; yet it is an acknowledged 
fact, that great numbers were thrown out of employ- 
ment, partly from the want of power, and partly 
from the want of will to employ the same quantity of 
labour as before. How is this fact to be accounted 
for ? As I have said before, it would not be easy to 
account for it without referring to a circulating medi- 
um ; because, without such reference, the proof of a 
defective distribution would be extremely difficult. 
But the moment we refer to a circulating medium, 
the theory of the fact observed becomes perfectly 
clear. It is acknowledged that there was a fall in 
the money value of the raw produce, to the amount, 
of nearly one third. But if the farmer sold his 
produce for onlv two thirds of the price at which he 
had before sold it, it is evident that he would be 
quite unable to command the same quantity of labour, 
and to employ the same quantity of capital on his 
farm as he did the year before. And when after- 
wards a great fall of money price took place in all 
manufactured products, occasioned in a considerable 
degree by this previous fall of raw produce, it is 
as evident that the manufacturers would be unable to 
command the labour of the same number of workmen 
as before. In the midst of the plenty of necessaries, 
these two important classes of society would really 
have their power of employing labour diminished, 
while all those who possessed fixed incomes^ would 
have their power of employing labour increased, with 
very little chance of an increase of will to extend 




SEC. VIII.] OF THE PROGRESS OF WEALTH. 345 



their demand in proportion ; and the general result 
would resemble the effects of that partial distribution 
of products which would arise from the interruption 
of accustomed communications. The same, or a 
greater quantity of commodities might be produced for 
a short time; but the distribution not being such as to 
proportion the supply in each quarter to the demand, the 
whole would fall in exchangeable value, and a very de- 
cided check to production would be experienced in 
reference to the whole country. It follows, that the 
labouring classes of society may be thrown out of 
work in the midst of an abundance of necessaries, 
if these necessaries are not in the hands of those who 
are at the same time both able and willing to employ 
an adequate quantity of labour. 

It is of no use therefore to make suppositions about 
a great increase of produce, and, rejecting all refer- 
ence to a circulating medium, to conclude that this 
great increase will be properly distributed and effec- 
tively consumed. It is a conclusion which we have 
no right whatever to make. We know, both from 
theory and experience, that if the whole produce 
falls in money value, the distribution must be such as 
to discourage production. As long as this fall in the 
money price of produce continues to diminish the 
power of commanding domestic and foreign labour, a 
great discouragement to production must obviously 
continue; and if, after labour has adjusted itself to 
the new level of prices, the permanent distribution 
of the produce and the permanent tastes and habits of 
the people should not be favourable to an adequate 
degree of consumption, the clearest principles of po- 
litical economy shew that the profits of stock might 
be lower for any length of time than the state of the 
land rendered necessary ; and that the check to pro- 
duction might be as permanent as the faulty distri- 
bution of the produce and the unfavourable tastes and 
habits which had occasioned it. 

44 



,346 ON THE IMMEDIATE CAUSES [CH. VU. 

It is scarcely possible for any essential change to 
take place in the value of the circulating medium of 
a country without occasioning an alteration in the 
distribution of its produce. The imprudent use of 
paper monev must be allowed to be the principal 
cause of these changes. But even without a paper 
currency, or with one always maintaining the same 
value as bullion, every country is liable to changes in 
the value of its produce, compared with its money ; 
and as such changes must have a great effect on the 
distribution of produce, partly temporary, and partly 
permanent, a determination to reason on these sub- 
jects, without taking into account the effects of so 
powerful an agent, would be purposely to shut our 
eyes to the truth. Referring therefore ultimately to 
the command over labour, domestic and foreign, as 
the best practical measure of the value of the whole 
produce, it will be useful to refer previously to its 
bullion value, in order to ascertain whether the dis- 
tribution of the produce is such as to enable it to 
command labour in some proportion to the increase 
of its quantity. If the bullion value of a country s 
products so increases as to command yearly an in- 
creased quantity of domestic and foreign labour, we 
may feel pretty well assured that it is proceeding 
without check in wealth and prosperity. But, it 
there is merely an increase of commodities, it is im- 
possible to say, without further inquiry, that they 
may not be so distributed as to retard, instead ot 
promote, the progress of national wealth. * 

It has been fully stated and allowed, that a period 
of stagnation must finally arrive in every country 
from the difficulty of procuring subsistence. But an 
indisposition to consume in large quantities the goods 
produced at home, and a want of the means of ad- 
vantageous barter may occasion, and has often occa- 
sioned, a similar stagnation at a very early period of 
a nation's progress. No country with a very con- 
fined market, internal as well as external, has ever 




SEC. VIII.] OF THE PROGRESS OF WEALTH. 34? 

been able to accumulate a large capital, because such 
a market prevents the formation of those wants and 
tastes, and that desire to consume, which are abso- 
lutely necessary to keep up the market prices of com- 
modities, and to occasion an increasing demand for 
them, and for the capital which is to produce them, 
lhe distribution of commodities occasioned by inter- 
nal trade is the first step towards any considerable 
increase of wealth and capital ; and if no exchanges 
could have taken place in this country, at a greater 
distance than five miles, it is probable that not a fifth 
part of our present capital could have been employed 
before the effective encouragement to accumulation 
and the further progress of wealth had ceased. 

The motives which urge individuals to engage in 
foreign commerce are precisely the same as those 
which lead to the interchange of goods between the 
more distant parts of the same country, namely, an 
increase in the market price of the local products; 
and the increase of profits thus made by the indivi- 
dual, or the prevention of that fall of profits which 
would have taken place if the capital had been em- 
ployed at home, must be considered as a proportionate 
increase in the value of the national produce. 

Mr. Ricardo begins his Chapter on Foreign Trade 
by stating that « No extension of foreign trade will 
immediately increase the amount of value in a coun- 
try although it will very powerfullv contribute to 
increase the mass of commodities and therefore the 
sum of enjoyments." This statement is quite consist- 
ent with his peculiar view of value, as depending 
solely upon the labour which a commodity has cost 
However abundant may be the returns of the mer- 
chant, or however greatly they may exceed his exports 
in value according to the common acceptation of the 
term, it is certain that the labour employed in procur- 
ing these exports will at first remain the same. But, 
as it is so glaring and undeniable a fact that the 
returns from an unusuallv favourable trade will 



348 ON THE IMMEDIATE CAUSES [CH. VII. 

exchange for an unusual quantity of money, labour 
and domestic commodities ; as this increased power 
of commanding money, labour and commodities is in 
reality what is meant by the merchant when he talks 
of the extension of the foreign market and a favour- 
able trade, it appears to me that such a state of things 
which may, and often does last a sufficient time to 
produce the most important results, is alone, and at 
once, a decisive proof that the view of exchangeable 
value, which makes it depend exclusively upon the 
cost of production, is essentially incorrect, and utter- 
ly useless in solving the great phenomena which attend 
the progress of wealth. 

Mr. Ricardo seems to think that value cannot 
increase in one department of produce without dimi- 
nishing it in some other.* This again may be true 
according to h is _yiew s bf value, but is utterly unfound- 
ed according to that more enlarged view of exchange- 
able value which is established and confirmed by 
experience. If any foreign power were to send to a 
particular merchant commodities of a new description 
which would sell in the London market for fifty thou- 
sand pounds, the wealth of such merchant would be 
increased to that extent ; and who, I would ask, would 
be the poorer for it ? It is no doubt true that the 
purchasers of these commodities may be obliged to 
forego the use of some of the articles which they 
had before been in the habit of buying,! and so far 
in some quarters may diminish demand ; but, to coun- 
terbalance this diminution, the enriched merchant will 
become a purchaser of additional goods to the amount 
perhaps of the whole fifty thousand pounds, and thus 

*It appears to me that if the two first sentences in Mr. Ricardo's Chapter on 
Foreign Trade were well founded, there would be no such intercourse between 



nations. 



+ This, however, will not necessarily happen. The greater temptation offered to 
consumption may induce some persons 10 spend what they otheiw.se would have 
saved, and in many cases the wealth of the country, instead of suffering, by this 
change, will gain by it The increased consumption, as iar as i* goes, will occasion 
an increase of market prices and profits. The increase of profits will soon restore the 
capital which for a short time had been diverted from its destined office; and Lfce 
country will be left with habits of greater consumption, and at the same time wan 
proportionate means of supplying them. 



SEC. VIII.] OF THE PROGRESS OF WEALTH. 34$ 

prevent any general fall in the value of the native 
produce consumed in the country, while the value of 
the foreign produce so consumed has increased to the 
amount of the whole of the new produce imported. 
I see no difference between a present from abroad, 
and the unusual profits of a new foreign trade, in 
their effects upon the wealth of a state. They are 
equally calculated to increase the wealth of the com- 
munity, by an increase both of the quantity and value 
of the produce obtained. 

It will be said perhaps thatp neither the people nor 
the money of the country having been by supposition 
increased, the value of the whole produce estimated 
in labour or money cannot be increased. 

With regard to labour I would observe that, when 
I speak of the value of the whole produce of a coun- 
try being able to command more labour than before, 
I do not mean to refer specifically to a greater number 
of labourers, but to say that it could either purchase 
more at the old price, or pay the actual labourers 
higher ; and such a state of things, with a population 
which cannot immediately be increased, always occa- 
sions that demand for labour, which so powerfully 
encourages the exertions of those who were before 
perhaps only half paid and half employed ; and is at 
once the surest sign and most effective stimulus of 
increasing wealth. It is the natural consequence of 
the value of the produce estimated in labour increas- 
ing faster than the population, and forms the true and 
healthy encouragement to the further increase of num- 
bers. 

With regard to money, this most useful measure of 
value would perform its functions very indifferently, 
if it could in no respect accommodate itself to cases of 
this kind ; and if the importation of a valuable com- 
modity always proportionablv reduced the price of 
the other parts of the national produce. But this is 
far from being the case, even if we do not suppose 
any fresh importation of the precious metals. The 
occurrence of such an event is precisely the period, 



350 ON THE IMMEDIATE CAUSES [CH. VR. 

when a greater velocity is given to the circulation of 
the money actually in use, and when fresh paper may 
be issued without a fall in the rate of foreign 
exchanges, or a rise in the price of bullion and of 
goods. One or other, or both of these resources 
will be applied, except in the most barbarous countries ; 
and though undoubtedly, in the case of the importation 
of foreign commodities which come directly into 
competition with domestic goods, such goods will 
fall in price, and the producers of them be for a time 
rendered poorer, yet it will very rarely indeed happen 
that other goods not affected by such competition 
will fall in money value ; and altogether no fall will 
take place in particular commodities sufficient to 
prevent a rise in the money price of the whole pro- 
duce. 

It may naturally be expected however that more 
money will be imported ; and, in fact, a successful 
extension of foreign trade is exactly that state of 
things which most directly leads to the importation of 
bullion. For what is it that the merchant exporter 
specifically considers as a successful extension of 
foreign commerce in dealing with civilized nations ? 
Undoubtedly the power of selling his exports abroad 
for a greater value than usual, estimated in bullion : 
and of course, if the goods which he would import 
in return will not sell at home so much higher as to 
warrant their importation, a part or the whole of the 
returns will be imported in money. But if only such 
an amount be imported as shall bear the same pro- 
portion to the returns in goods as the whole of the 
currency of the country does to the whole of its pro- 
duce, it is obvious that no difficulty whatever can 
occur in the circulation of the commodities of the 
country at their former prices, with the single excep- 
tion of those articles with which the foreign goods 
might directly enter into competition, which in this 
case would never be sufficient to prevent a general in 
crease of value in the whole produce. 









• > . VIII.] OF THE PROGRESS OF WEALTH. 351 

I distinctly therefore differ from Mr. Ricardo in 
the conclusion implied in the following passage. " In 
all cases the demand for foreign and home commodi- 
ties together, as far as regards value, is limited by 
the revenue and capital of the country. If one in- 
creases, the other must diminish.''* It appears to me 
that in almost every case of successful foreign trade 
it is a matter of unquestionable fact that the demand 
for foreign and home commodities taken together de- 
cidedly increases ; and that the increase in the value 
of foreign produce does not occasion a proportionate 
diminution i , the value of home produce. 

1 would si , Ter a l|o W that the demand for 

foreign and horn. Cities t th ag fo 
gaids value, is ,mi ly the revenlle and . , f 
the country; but, at ,-ding to my view of the 
subject, the national re. mue, which consists of the 
sum of rents, profits, and ages, is at once decidedly 
increased by the increased profits of the foreign mer- 
chant, without a proportionate diminution of revenue 
in any other quarter ; whereas Mr. Ricardo is evident- 
ly of opinion that, though the abundance of commo- 
dities is increased, *he revenue of the country as 
far as regards value, remains the same; and t is 
because I object rather to the conclusion intended to 
be conveyed, than to the actual terms of the parage 

E2£H have " ,ed the word im * lkd - hS 

It will readily be allowed that an increase in the 

lZT y J( C ° mm0dltles is °» e «f the most desirable 
effects of foreign commerce ; but I wish particularly 
to press on the attention of the reader that in almost 
all cases, another most important effect accompaS 
t, expressly rejected by Mr. Ricardo, namefv, a „ 
acrease in the amount of exchangeable value. * Ai d 
that this latter effect is so necessary, in o der to 
create a continued stimulus to productive industry! 

* Princ. of Polit Econ. c. vii. p. 138. 2 d e* 



352 ON THE IMMEDIATE CAUSES [CH. til. 

and keep up an abundant supply of commodities, that 
in the few cases in which it does not take place, a 
stagnation in the demand for labour is immediately 
perceptible, and the progress of wealth is checked. 
An extension of foreign commerce, according to the 
view which Mr. Ricardo takes of it, would, in m\ 
opinion, place us frequently in the situation in which 
this country was in the early part of 1816, when a 
sudden abundance and cheapness of corn and other 
commodities, from a great supply meeting a deficient 
demand, so diminished the value of the income of 
the country, that it could no longer command the 
same quantity of labour at the - ice : the con- 

sequence of which was that, ; midst of plenty, 

thousands upon thousands v thrown out of em- 
ployment— a most painful -t almost unavoidable 
preliminary to a fall in the money wages of labour, 
which it is obvious could one enable the general in- 
come of the country to employ the same number ot 
labourers as before, and, after a period of severe 
check to the increase of wealth, to recommence a 
progressive movement. 

Mr. Ricardo always seems to think that it is quite 
the same to the labourer, whether he is able to com- 
mand more of the necessaries of life by a rise in the 
money price of labour, or by a fall in the money 
price of provisions ; but these two events, though ap- 
parently similar in their effects, may be, and m 
general are, most essentially different. An increase 
o;es of labour, both nominal and real, inva- 
v imulies such a distribution of the actual wealth 
as to give it an increasing value, to ensure full em- 
ployment to all the labouring classes, and to create a 
demand for further produce, and for the capital which 
o obtain it. In short, it is the infallible sign of 
health and prosperity. Whereas a general tall m the 
y price of necessaries often arises from so de- 
f< a distribution of the produce of the country, 

that the geuoral amount of its value cannot be kept 



SEC. VIII.] OP THE PROGRESS OF WEALTH. 353 

slanr^ Whi f CaS6 ' mu]er . t]w mo * favourable circum- 
stances, a temporary period of want of employment 
and duress, unavoidably; and in many castas 
may be too frequently observed in surveying the dif- 
ferent countries of the globe, this fall il the 1 
puce oi necessaries is the accompaniment of a oer- 
%5£ fS ° f em P'°^ ent ' ■* the mo° s ; Object 

i; diSird o, 3h nceof retrograde and per ~- 

' thel'rTce^ 61 ' T" f* ^ aW3re that a S rea ' f «» in 
he price of particular commodities, either from im- 
proved machinery or foreign commerce, is perfeX 
compatible with a continued and great increase nol 
only i„ the exchangeable value of Se whSSMS 
of the country, but even in the exchangeable va"ue 

t^t h r d r of these p articuiar **& 

tnemselves. It has been repeatedly stated that the 

h*:k:« z f the r tons p "° duced - & " 

irJ fell Pr ° d 'g ,0usl 7 '"creased, notwithstanding the 
great fall ,„ their price. The same may be said of 
the teas, although when they were first imported the 

V price per pound was greatly higher than aVpresent 
and there can be little doubt, that if we were to at - 

I tempt to make our wines by means of hot house 
hey would altogether be worth much less money, and 

r;rese g nr eilC ° Uragement * mUCh JeSS i»dustr/than 

noftoadiSof^ T m0di % is L ° f Such a nature » 
not to adm t of an extension of the market for it from 

caS a P nr'l f ^ TV*.* 1 ? happe ' ,S ' *« ^ 
capital and labour, which in this case will be 

PrsWand^ emp, ° y , ment ' *& generally, inente. 

h to whtl thT me ' Cla C ° J UntrieS ' find other cha «nels 
into which they may be directed, with such profit 

as to keep up, and often more than keep U p P , the 
value of the national income. At the samlf time 
it should be observed, and it is a point 3 great 
importance, that it is precisely among cases o/hL 
description where the few exception! occur to the 
general and powerful tendency of foreign commerce! 



354 ON THE IMMEDIATE CAUSES [CH. VII 

to raise the value of the national income ; and when- 
ever these exceptions do take place, that is, whenever 
the value of the national income is diminished, esti- 
mated even in money, a temporary distress from a 
defective distribution of the produce cannot fail to 
take place. If this diminished value be estimated in < 
labour, the distress among the labouring classes, and 
check to the progress of wealth, will continue as long 
as the diminished value so estimated lasts : and if it , 
could be proved that, under particular circumstances, { 
any species of foreign trade tended permanently to 
diminish the power of the national produce in the 
command of domestic and foreign labour, such trade 
would certainly have the effect of checking perma- 
nently the progress of wealth and population. 

The causes of an increase in the effective demand 
for particular commodities are of very easy explana- 
tion ; but it has been considered, and with reason, as 
not very easy to explain the cause of that general 
briskness of demand which is sometimes so very 
sensibly felt throughout a whole country, and is so 
strikingly contrasted with the feeling which gives f 
rise to the expression, of trade being universally very ' 
dead. As the specific and immediate cause of this 
general increase of effective demand, I should deci- 
dedly point to such a distribution of the produce, and 
such an adaptation of it to the wants and tastes of 
the society as will give the money price for which it 
sells an increased command of domestic and foreign 
labour ; and I am inclined to think that, if this test be 
applied to all the striking cases that have occurred, it 
will rarely or never be found to fail. 

It cannot for a moment be doubted, for instance, 
that the annual increase of the produce of the United 
States of America, estimated either in bullion or in 
domestic and foreign labour, has been greater than that 
of any country we are acquainted with, and that this 
has been greatly owing to their foreign commerce, 
which, notwithstanding their facility of production, 



SEC. VIII.] OF THE PROGRESS OF WEALTH. S55 

has given a value to their corn and raw produce 
equal to what they bear in many of the countries of 
Europe, and has consequently given to them a power 
in commanding the produce and labour of other coun- 
tries quite extraordinary, when compared with the 
quantity of labour which they have employed. It 
can as little be doubted that in this country, from 
1793 to 1814, the whole exchangeable value of the 
produce, estimated either in domestic and foreign 
labour, or in bullion, was greatly augmented every 
year. In this increase of value, as well as riches, the 
extension of our foreign commerce has been consid- 
ered, almost without a dissentient opinion, as a most 
powerful agent; and certainly till 1815, no appearan- 
ces seemed to indicate, that the increasing value of 
our imports had the slightest tendency to diminish 
the value of our domestic produce. They both 
increased, and increased greatly, together, estimated 
either in bullion or labour. 

But while in every country to which it seems pos- 
sible to refer, an increase of value will be found to 
accompany increasing prosperity and riches, I am 
inclined to think that no single instance can be pro- 
duced of a country engaged in a successful commerce, 
and exhibiting an increasing plenty of commodities, 
where the value of the whole produce estimated m 
domestic and foreign labour was retrograde or even 
stationary. And of the two ways in which capital 
may be accumulated, as stated by Mr. Ricardo in his 
chapter on Foreign Commerce, namely an increase 
of revenue from increased profits, or a diminished 
expenditure, arising from cheap commodities,* I 
believe the latter never has been, nor ever will be, 
experienced as an effective stimulus to the permanent 
and continued production of increasing wealth. 

Mr. Ricardo will perhaps say, and say truly, that 
according to his own view of value, foreign com- 

* Price, of Po). Econ. ch. vii. p. 139. 2d edit. 



356 ON THE IMMEDIATE CAUSES [CH. VII. 

merce will increase it, as soon as more labour has 
been employed in the production of all the commodi- 
ties taken together, which the country obtains ; and 
that the plenty produced by foreign trade will natu- 
rally encourage this employment. But what I wish 
specifically to state is, that the natural tendency of 
foreign trade, as of all sorts of exchanges by which a 
distribution is effected better suited to the wants of 
society, is immediately to increase the value of that 
part of the national revenue which consists of profits, 
without any proportionate diminution elsewhere, and 
that it is precisely this immediate increase of national 
income arising from the exchange of what is of less 
value in the country, for what is of more value, that 
furnishes both the power and will to employ more 
labour, and occasions the animated demand for labour, 
produce and capital, which is a striking and almost 
universal accompaniment of successful foreign com- 
merce ; whereas, a mere abundance of commodities 
falling very greatly in value compared with labour, 
would obviously at first diminish the power of 
employing the same number of workmen, and a 
temporary glut and general deficiency of demand 
could not fail to ensue in labour, in produce, and in 
capital, attended with the usual distress which a glut 
must occasion. 

Mr. Ricardo always views foreign trade in the light 
of means of obtaining cheaper commodities. But 
this is only looking to one half of its advantages, and 1 
am strongly disposed to think, not the larger half. In 
our own commerce at least, this part of the trade is 
comparatively inconsiderable. The great mass of 
our imports consists of articles as to which there can 
be no kind of question about their comparative cheap- 
ness, as raised abroad or at home. If we could not 
import from foreign countries our silk, cotton and 
indigo, our tea, sugar, coffee and tobacco, our port, 
sherry, claret and champagne, our almonds, raisins, 
oranges, and lemons, our various spices and our 



■SEC. VIII.] OP THE PROGRESS OF WEALTH. 357 

various drugs, with many other articles peculiar to 
foreign climates, it is quite certain that we should not 
have them at all. To estimate the advantage derived 
trom their importation by their cheapness, compared 
with the quantity of labour and capital which they 
would have cost, if we had attempted to raise them at 
home, would be perfectly preposterous. In realitv, 
no such attempt would have been thought of. [f we 
could by possibility have made fine claret at ten pounds 
a bottle, tew or none would have drunk it ; and the 
actual quantity of labour and capital employed in 
obtaining these foreign commodities, is at present 
beyond comparison greater, than it would have been 
it we had not imported them. 

We must evidently therefore estimate the advan- 
tage which we derive from such a trade upon a very 
different principle. This is the simple and obvious 
one often adverted to as the foundation of every act 
of barter, whether foreign or domestic, namely, the 
increased value which results from exchanging what 
is wanted less for what is wanted more. After we 
had, by our exports of home commodities, obtained in 
return all the foreign articles above-mentioned, we 
might be very much puzzled to say whether we had 
increased or decreased the quantity of our commodi- 
ties, but we should feel quite certain that the new dis- 
tribution of produce which had taken place, by giving 
us commodities much better suited to our wants and 
tastes than those which had been sent away, had decid- 
edly increased the exchangeable value of our posses- 
sions our means of enjoyment, and our wealth. 

laking therefore a very different view of the effects 
ot foreign commerce on exchangeable value from Mr. 
Kicardo, I should bring forwards the extension of 
markets as being, in its general tendency, pre-emi- 
nently favourable to that increase of value and wealth 
Which arises from distribution. 



358 ON THE IMMEDIATE CAUSES [CH. VII. 



SECTION IX. 

Of the Distribution occasioned by unproductive Consumers, 
considered as the Means of increasing the exchangeable 
Value of the whole Produce. 

The third main cause which tends to keep up and 
increase the value of produce by favouring its distribu- 
tion, is the employment of unproductive labour, or the 
maintenance of an adequate proportion of unproduc- 
tive consumers. 

It has been already shewn that, under a rapid accu- 
mulation of capital, or, more properly speaking, a 
rapid conversion of unproductive into productive 
labour, the demand, compared with the supply of 
material products, would prematurely fail, and the 
motive to further accumulation be checked, before it 
was checked by the exhaustion of the land. It fol- 
lows that, without supposing the productive classes to 
consume much more than they are found to do by 
experience, particularly when they are rapidly saving 
korn|revenue to add to their capitals, it is absolutely 
necessary that a country with great powers of produc- 
tion should possess a body of unproductive consu- 
mers. 

In the fertility of the soil, in the powers of man to 
apply machinery as a substitute for labour, and in the 
motives to exertion under a system of private proper- 
ty, the great laws of nature have provided for the 
leisure of a certain portion of society ; and if this 
beneficent offer be not accepted by an adequate num- 
ber of individuals, not only will a positive good, which 
might have been so attained, be lost, but the rest of 
the society, so far from being benefited by such self- 
denial, will be decidedly injured by it. 

What the proportion is between the productive and 
unproductive classes of a society, which affords the 
greatest encouragement to the continued increase of 
wealth, it has before been said that the resources of 



SEC. IX.] OF THE PROGRESS OF WEALTH. 359 

political economy are unequal to determine. It must 
depend upon a great variety of circumstances, par- 
ticularly upon fertility of soil and the progress of inven- 
tion in machinery. A fertile soil and an ingenious 
people can not only support a considerable proportion 
of unproductive consumers without injury, but may 
absolutely require such a body of demanders, in order 
to give effect to their powers of poduction. While, 
with a poor soil and a people of little ingenuity, an 
attempt to support such a body would throw land out 
of cultivation, and lead infallibly to impoverishment 
and ruin. 

Another cause, which makes it impossible to say 
what proportion of the unproductive to the produc- 
tive classes is most favourable to the increase of 
wealth, is the difference in the degrees of consump- 
tion which may prevail among the producers them- 
selves. 

Perhaps it will be said that there can be no occa- 
sion for unproductive consumers, if a consumption 
sufficient to keep up the value of the produce takes 
place among those who are engaged in production. 

With regard to the capitalists who are so engaged, 
they have certainly the power of consuming their 
profits, or the revenue which they make by the em- 
ployment of their capitals ; and if they were to con- 
sume it, with the exception of what could be bene- 
ficially added to their capitals, so as to provide in the 
best way both for an increased production and increas- 
ed consumption, there might be little occasion for un- 
productive consumers. But such consumption is not 
consistent with the actual habits of the generality 
of capitalists. The .great object of their lives is to 
save a fortune, both because it is their duty to make 
a provision for their families, and because they can- 
not spend an income with so much comfort to them- 
selves, while they are obliged perhaps to attend a 
counting-house for seven or eidit hours a dav. 



360 ON THE IMMEDIATE CAUSES [CH. VII. 

It has been laid down as a sort of axiom among 
some writers, that the wants of mankind may be con- 
sidered as at all times commensurate with their 
powers ; but this position is not always true, even in 
those cases where a fortune comes without trouble ; 
and in reference to the great mass of capitalists, it is 
completely contradicted by experience. Almost all 
merchants and manufacturers save, in prosperous 
times, much more rapidly than it would be possible 
for the national capital to increase, so as to keep up 
the value of the produce. But if this be true of them 
as a body, taken one with another, it is quite obvious 
that, with their actual habits, they could not afford 
an adequate market to each other by exchanging their 
several products. 

There must therefore be a considerable class of 
other consumers, or the mercantile classes could not 
continue extending their concerns, and realizing their 
profits. In this class the landlords no doubt stand 
pre-eminent ; but if the powers of production among 
capitalists are considerable, the consumption of the 
landlords, in addition to that of the capitalists them- 
selves and of their workmen, may still be insufficient 
to keep up and increase the exchangeable value of 
the whole produce, that is, to make the increase of 
quantity more than counterbalance the fall of price. 
And if this be so, the capitalists cannot continue the 
same habits of saving. They must either consume 
more, or produce less ; and when the mere pleasure 
of present expenditure, without the accompaniments 
of an improved local situation and an advance in 
rank, is put in opposition to the continued labour of 
attending to business during the greatest part of the 
day, the probability is that a considerable body of 
them will be induced to prefer the latter alternative, 
and produce less. But if, in order to balance the 
demand and supply, a permanent diminution of pro- 
duction takes place, rather than an increase of con- 
sumption, the whole of the national wealth, which 



SEC. IX.] OF THE PROGRESS 6F WEALTH. 361 

consists of what is produced and consumed, and not 
ot the excess of produce above consumption, will be 
decidedly diminished. 

»,,?'"' ^'Tt fre< l uentl J s P ea ks, as if saving were an 
end ins ead of a means. Yet even with regard to in- 
dividuals, where this view of the subject is nearest 
the truth, ,t must be allowed that the final object in 
saving is expenditure and enjoyment. But, in refer- 
ence to national wealth, it can never be considered 
either immediately or permanently in any other light 

If™™ a "Jv " S ' !t ? 7 be true that > b J ^e cheapntss 
of commodities, and the consequent saving of expen- 
diture m consumption, the same surplus of produce 
above consumption may be obtained as by a great 
rise of profits with an undiminished consumption • 
and, ,f saving were an end, the same end would be 
accomplished. But saving i s the means of furnishing 
an increasing supply for the increasing national wants. 
It however commodities are already so plentiful that 
an adequate portion of them is not consumed, the 
capital so saved, the office of which is still further 
to increase tne plenty of commodities, and still further 
o ower already low profits, can be comparatively of 
little use. On the other hand, if profits are high, it 

wfthT 7 n that , com , moditieS are scarce > c °mpared 
with the demand for them, that the wants of the so- 
ciety are clamorous for a supply, and that an increase 

™,? fT" S P roductlon > h Y ^ving a considerable 
part ot the new revenue created by the high profits, 
and adding it to capital, will be specifically and pS 
manently beneficial. y p 

National saving, therefore, considered as the means 
of increased production, is confined within much 
narrower hmits than individual saving. While some 

continu. f C0DtinUet ° Spend ' other Individuals may 
continue to save to a very great extent ; but the 
national saving, or the balance of produce above con- 
sumpt.on, ,n reference to the whole mass of pro- 
ducers and consumers, must necessarily be limited by 



362 ON THE IMMEDIATE CAUSES [CH. VII, 

the amount which can be advantageously employed in 
supplying the demand for produce ; and to create this 
demand, there must be an adequate consumption 
either among the producers themselves, or other 
classes of consumers. 

Adam Smith has observed " that the desire ol lood 
is limited in every man by the narrow capacity of the 
human stomach ; but the desire of the conveniences 
and ornaments of building, dress, equipage, and 
household furniture, seems to have no limit or certain 
boundary." That it has no certain boundary is un- 
questionably true ; that it has no limit must be allow- 
ed to be too strong an expression, when we consider 
how it will be practically limited by the countervail- 
ing luxury of indolence, or by the general desire of 
mankind to better their condition, and make a pro- 
vision for a family ; a principle which, as Adam 
Smith himself states, is on the whole stronger than 
the principle which prompts to expense.* But 
surely it is a glaring misapplication of this statement 
in any sense in which it can be reasonably under- 
stood, to say, that there is no limit to the saving and 
employment of capital except the difficulty of pro- 
curing food. It is to found a doctrine upon the 
unlimited desire of mankind to consume ; then to 
suppose this desire limited in order to save capital, 
and thus completely alter the premises ; and yet still 
to maintain that the doctrine is true. Let a sufficient 
consumption always take place, whether by the pro- 
ducers or others, to keep up and increase most effec- 
tually the exchangeable value of the whole produce ; 
and I am perfectly ready to allow that, to the employ- 
ment of a national capital, increasing only at such a 
rate, there is no other limit than that which bounds 
the power of maintaining population. But it appears 
to me perfectly clear in theory, and universally con- 
firmed by experience, that the employment of a capital. 

* Wealth of Nations, Vol. ii. B. ii. ch. ii. p. 19. 6th edit. 



SEC. IX.] OF THE PROGRESS OF WEALTH. 368 

too rapidly increased by parsimonious habits, mav 
ftnd a hunt, and does, in fact, often find a limit, lone 
before there is any real difficulty in procuring thl 
means of subsistence ; and that both capital and popu- 
lation may be at the same time, and for a period of 
great length, redundant, compared with the effective 
demand for produce. 

Of the wants of mankind in general, it may be 
further observed, that it is a partial and narrow view 
of the subject, to consider only the propensity to 
spend what ,s actually possessed. It forms but a 
very small part of the question to determine that if a 
man has a hundred thousand a jear, he will not decline 

rafl v £, ? th r USand m ° re ; or t0 la ^ dow ° gene- 
rally that mankmd are never disposed to refusl the 

mrt'of lr reas f ed P° wer a !' d enjoyment. The main 

K/t?! fh q " B " res P ectln g the wants of mankind, 
relates to their power of calling forth the exertions 
necessary to acquire the means of expenditure. It is 

k%7S My true that wealth P roduces wants ; b» 

wealrh F J 6 lm P° rtant * uth > that wants produce 
wea th. Each cause acts and re-acts upon the other 
but the order, both of precedence and of importance 
* with the wants which stimulate to indusrry and 

lt: Sart0 theSe ' k /PP ea ^ that,: instead oHeing 
always ready to second the physical powers of man 
they require for their developement, « all appliances 
and means to boot." The greatest of all difficulties in 

roTviied'r Iized , and thini >- p e °p ,ed sss 

vthth? . . P ° PU0U ? ones ' is t0 ins P^e them 
with the wants best calculated to excite their exer- 
tions ,„ the production of wealth. One of the ff reat- 

SsoTwi;; 7t h n Ch ^ C ° mmerCe ""*» >*£** 
sa^mS , hdS *l Wa y s W^red an almost neces- 

de7rvf M the pr °S ress of wealth, is, its ten- 

dency to inspire new wants, to form new tastes, and 

to furnish fresh motives for industry. Even civ lized 
and i raproved tries cannot ^ i^™ 

these mot.ves. It is not the most pleasant empiy 



364 ON THE IMMEDIATE CAUSES [CH. VII. 

ment to spend eight hours a day in a counting-house. 
Nor will it be submitted to after the common neces- 
saries and conveniencies of life are attained, unless 
adequate motives are presented to the mind of the 
man of business. Among these motives is undoubted- 
ly the desire of advancing his rank, and contending 
with the landlords in the enjoyment of leisure, as 
well as of foreign and domestic luxuries. 

But the desire to realize a fortune as a pemanent pro- 
vision for a family, is perhaps the most general motive 
for the continued exertions of those whose incomes de- 
pend upon their own personal skill and efforts. What- 
ever may be said of the virtue of parsimony or 
saving, as a public duty, there cannot be a doubt that 
it is, in numberless cases, a most sacred and binding 
private duty ; and were this legitimate and praise- 
worthy motive to persevering industry in any degree 
weakened, it is impossible that the wealth and 
prosperity of the country should not most materially 
suffer. But if, from the want of other consumers, 
the capitalists were obliged to consume all that 
could not be advantageously added to the national 
capital, the motives which support them in their daily 
tasks must essentially be weakened, and the same 
powers of production would not be called forth. 

It has appeared then, that, in the ordinary state of 
society, the master producers and capitalists, though 
they may have the power, have not the will, to con- 
sume to the necessary extent. And with regard to 
their workmen, it must be allowed that, if they pos- 
sessed the will, they have not the power. It is indeed 
most important to observe that no power of consump- 
tion on the part of the labouring classes can ever, 
according to the common motives which influence 
mankind, alone furnish an encouragement to the 
employment of capital. As I have before said, nobo- 
dy will ever employ capital merely for the sake of 
the demand occasioned by those who work for him. 
Unless they produce an excess of value above what 



SEC. IX.] OF THE PROGRESS OF WEALTH. 365 

they consume, which he either wants himself in kind, 
or which he can advantageously exchange for some- 
thing which he desires, either for present or future 
use, it is quite obvious that his capital will not be 
employed in maintaining them. When indeed this 
further value is created and affords a sufficient excite- 
ment to the saving and employment of stock, then 
certainly the power of consumption possessed by the 
workmen will greatly add to the whole national 
demand, and make room for the employment of a 
much greater capital. 

It is most desirable that the labouring classes should 
be well paid, for a much more important reason than 
any that can relate to wealth ; namely, the happiness 
of the great mass of society. But to those who are 
inclined to say that unproductive consumers cannot 
be necessary as a stimulus to the increase of wealth, 
if the productive classes do but consume a fair pro- 
portion of what they produce, I would observe that 
as a great increase of consumption among the work- 
ing classes must greatly increase the cost of produc- 
tion, it must lower profits, and diminish or destroy the 
motive toaccumulate, before agriculture, manufactures, 
and commerce have reached any considerable degree of 
prosperity. If each labourer were actually to con- 
sume double the quantity of corn which he does at 
present, such a demand, instead of giving a stimulus 
to wealth, would probably throw a great quantity of 
land out of cultivation, 'and greatly diminish both 
internal and external commerce. 

There is certainly however very little danger of a 
diminution of wealth from this cause. Owing to the 
principle of population, all the tendencies are the 
other way ; and there is much more reason to fear 
that the working classes will consume too little for 
their own happiness, than that they will consume too 
much to allow of an adequate increase of wealth. I 
only adverted to the circumstance to shew that, sup- 
posing so impossible a case as a very great consump- 
tion among the working producers, such consumption 



36() ON THE IMMEDIATE CAUSES [CH. VIL 

would not be of the kind to push the wealth of a 
country to its greatest extent. 

It may be said, perhaps, that though, owing to the 
laws which regulate the increase of population, it is 
in no respect probable that the corn wages of labour 
should continue permanently very high, yet the same 
consumption would take place if the labouring classes 
did not work so many hours in the day, and it was 
necessary to employ a greater number in each occu- 
pation. 1 have always thought and felt that many 
among the labouring classes in this country work too 
hard for their health, happiness, and intellectual 
improvement ; and, if a greater degree of relaxation 
from severe toil could be given to them with a tolera- 
bly fair prospect of its being employed in innocent 
amusements and useful instruction, I should consider 
it as very cheaply purchased, by the sacrifice of a 
portion of the national wealth and populousness. 
But 1 see no probability, or even possibility, of 
accomplishing this object. To interfere generally 
with persons who are arrived at years of discretion 
in the command of the main property which they 
possess, namely their labour, would be an act of gross 
injustice ; and the attempt to legislate directly in the 
teeth of one of the most general principles by which 
the business of society is carried on, namely, the 
principle of competition, must inevitably and neces- 
sarily fail. It is quite obvious that nothing could be 
done in this way, but by the labouring classes them- 
selves ; and even in this quarter we may perhaps much 
more reasonably expect that such a degree of pru- 
dence will prevail among them as to keep their wages 
permanently high, than that they should not enter 
into a competition with each other in working. A 
man who is prudent before marriage, and saves some- 
thing for a family, reaps the benefit of his conduct, 
although others do not follow his example ; but, with- 
out a simultaneous resolution on the part of all the 
labouring classes to work fewer hours in the day, the 



SEC. IX.] OF THE PROGRESS OF WEALTH. 367 

individual who should venture so to limit his exer- 
tions would necessarily reduce himself to comparative 
want and wretchedness. If the supposition here 
made were accomplished, not by a simultaneous reso- 
lution, which is scarcely possible, but by those gene- 
ral habits of indolence and ignorance, which so fre- 
quently prevail in the less improved stages of society 
it is well known that such leisure would be of little 
value ; and that while these habits would prematurely 
check the rate of profits and the progress of popula- 
tion, they would bring with them nothing to com- 
pensate the loss. 

It is clear therefore that, with the single exception 
ol the increased degree of prudence to be expected 
among the labouring classes of society from the pro- 
gress of education and general improvement, which 
may occasion a greater consumption among the 
working producers, all the other tendencies are pre- 
cisely m an opposite direction; and that, generally; all 
such increased consumption, whether desirable or not 
on other grounds, must always have the specific effect 
of preventing the wealth and population of a country 
under a system of private property, from being 
pushed so far, as it might have been, if the costs of 
production had not been so increased. 

It may be thought perhaps that the landlords could 
not fail to supply any deficiency of demand and con- 
sumption among the producers, and that between 
hem there would be little chance of any approach 
towards redundancy of capital. What might be the 
result of the most favourable distribution of landed 
property, it ,s not easy to say from experience : but 
experience certainly tells us that, under the distribu- 
tion of land which actually takes place in most of the 
countries in Europe, the demands of the landlords 
added to those of the producers, have not always 
been found sufficient to prevent any difficulty in the 
employment of capital. In the instance alluded to in 
a former chapter, which occurred in this country m 



368 ON THE IMMEDIATE CAUSES ^CH. V1L 

the middle of last century, there must have been a 
considerable difficulty in finding employment ior 
capital, or the national creditors would rather have 
been paid off, than have submitted to a reduction ot 
interest from 4 per cent, to 3i, and afterwards to 3* 
And that this fall in the rate of interest and profits 
arose from a redundancy of capital and a want of 
demand for produce, rather than from the difficulty ot 
production on the land, is fully evinced by the low 
price of corn at the time, and the very different state 
of interest and profits which has occurred since. 

A similar instance took place in Italy in 1685, 
when, upon the Pope's reducing the interest of his 
debts from 4 to 3 per cent., the value of the principal 
rose afterwards to 112 ; and yet the Pope's territories 
have at no time been so cultivated as to occasion 
such a low rate of interest and profits from the diffi- 
culty of procuring the food of the labourer. Under 
a more favourable distribution of property, there can- 
not be a doubt that such a demand for produce, 
agricultural, manufacturing, and mercantile, might 
have been created, as to have prevented for many 
manv years the interest of money from falling below 3 
per cent. In both these cases, the demands of the 
landlords were added to those of the productive 

plrisses. 

But if the master-producers, from the laudable 
desire they feel of bettering their condition, and pro- 
viding for a family, clo not consume sufficiently to 
o-ive an adequate stimulus to the increase of wealth ; 
if the working producers, by increasing their con- 
sumption, supposing them to have the means of so 
doing, would impede the growth of wealth more by 
diminishing the power of production, than they could 
encourage it by increasing the de nand for produce; 
and if the expenditure of the landlords, in addition to 
the expenditure of the two preceding classes, be found 
insufficient to keep up and increase the value of that 
which is produced, where are we to look for the 



SEC. IX.] OF THE PROGRESS OF WEALTH. 369 

consumption required but among the unproductive 
Iaoourers of Adam Smith ? 

Every society must have a body of unproductive 
labourers ; as every society, besides the menial ser- 
vants that are required, must have statesmen to govern 
it, soldier* to defend it, judges and lawyers to fdmin- 
ister justice and protect the rights of individuals, phy- 
sicians and surgeons to cure diseases and heal wounds, 
and a body of clergy to instruct the ignorant, and 
administer the consolations of religion. No civilized 
state has ever been known to exist without a certain 
portion of all these classes of society, in addition to 
those who are directly employed in production. To a 
certain extent therefore they appear to be absolutely 
necessary. But ,t ,s perhaps one of the most impor- 
tant practical questions that can possibly be brought 
under our view, whether, however necessary and 
desirable they may be, they must be considered as 
detracting so much from the material products of a 
coun ry, and us power of supporting an extended 
population ; or whether they furnish fresh motives to 

Ci !£"' ?" d tC ^ t0 P ush the wealth ° f a country 
farther than it would go without them. * 

lhe solution of this question evidently depends 
first upon the so ut.on of the main practical question 
whether the capital of a country can or cannot be 
redundant ; that is, whether the motive to accumulate 

San^n^fr deSt ^f d b * the Want of effective 
demand long before it is checked by the difficulty of 

procuring the subsistence of the labourer. And sec- 
ondly whether, allowing the possibility of such a 
redundance, there ,s sufficient reason to believe that 
under the actual habits of mankind, it is a probable 
occurrence. i^^iaui^, 

tJ"™ 6 A h e Pte ? ° n ? rofits > but more particularly in 
the Third Section of the present Chapter, where I 
have considered the effect of accumulation as a stimu- 
lus to the increase of wealth, I trust that the first of 
these questions has been satisfactorily answered. 4nd 

47 



370 ON THE IMMEDIATE CAUSES [CH. VII. 

fe. the present Section it has been shewn, that the 
actual habits and practice of the productive classes, in 
the most improved societies, do not lead them to con- 
sumed large a proportion of what they produce, even 
Zgh assfsted Vthe landlords, as to prevent thej 
finding frequent difficulties in the employmer , o< £eu 
canitals We may conclude therefore, with little dan- 
ger S error that such a body of persons as I have 

fe cr bed is' not only necessary to the go-—; 
nroteetion, health, and instruction of a country, but 
Lalso necessary to call forth those exertions which 
avet quired to give full play to its physical resources. 
With respect to the persons constitutmg ; the unpro- 
ductive classes, and the modes by which they should. 
be supported, it is probable that those which are paid 
voluntarily by individuals, will be allowed by all to 
£ the mLVely tobe usefulin •yWJjgj 
and the least likely to be prejudicial by inteitenng 
with the costs of production. It may be presumed 
tTa a person will not take a menial servant, unless he 
^afford to Pay him ; and that he is as likely to be 
x i^ouLybythe prospect of this indulgence 
as bv the prospect of buying ribands and laces. Y et 
to shew to/much the wealth of nations depends 
ion the proportion of parts, rather than on any posi- 
tive rules re pecting the advantages of productive or 
^productive labour generally, it may be worth while 
"remind the reader that, though the employment of 
S number of persons in "^""»" 
every respect desirable, there could hardly be a taste 
more unfavourable to the progress of wealth than a 
smn* preference of menial service to material pro- 
d cts°* P We may however, for the most part, trust to 
the inclinations of individuals in this respect : ; and it 
w 11 bellowed generally, that there is little difficulty 
Preference to those classes which are supported vol- 



* See Cb. i. p- 35. 



SEC. IX.] OF THE PROGRESS OF WEALTH. 371 

untarily though there may be much with regard to 
those which must be supported by taxation. 

With regard to these latter classes, such as states- 
men, soldiers, sailors, and those who live upon the 
interest of a national debt, it cannot be denied that 
they contribute powerfully to distribution and demand: 
they frequently occasion a division of property more 
favourable to the progress of wealth than would other- 
wise have taken place ; they ensure that consumption 
which is necessary to give the proper stimulus to pro- 
duction ; and the desire to pay a tax, and yet eiijov 
the same means of gratification, must often operate to 
excite the exertions of industry, quite as effectually as 
the desire to pay a lawyer or physician. Yet to coun- 
terbalance these advantages, which so far are unques- 
tionable, it must be acknowledged that injudicious 
taxation might stop the increase of wealth at almost 
any period of its progress, early or late;* and that the 
most judicious taxation might ultimately be so heavy 
as to clog all the channels of foreign and domestic 
lation " P revent Ae possibility of accumu- 

The effect therefore on national wealth of those 
classes of unproductive labourers which are supported 
by taxation, must be very various in different coun- 

Zl?? mUS j depe "l entirel - y U P°" the P°wers of 
Production, and upon the manner in which the taxes 
aera lsed h As great powers of pro- 

duction are neither likely to be called into action, or, 
when once m action, kept in activity without great 

have" ZT ' , fCel V6 ^ Httle doub ' that £JE 
have practically occurred of national wealth being 

1 w:le;* d c ;^to^foM^f:rat r m o u^ lai " portio " o ^ riclll »" dlomai "'-° 

tivatemore, and create more wealth ,'h g t '" s ™e c «es only induce bin, to col. 
might leave him personal a, rt!h ?, hrf" "' °' h ,™ e . <™uld have done, while it 
obligation were to be Cosed o »' ^ • ' ""'""^ '' but if "« »"« 

the properly might be rendered at 1? , ^ a " T al 1 u »»«tr «f poor land, 
would be the natu al consent a °°h- "'"" • """""I • aDd the «'«•"*<»' °f it 
duce might immediately scatter £«,.." ,nd,Bcr " I, "> al « ! *•"* heavy tax on gro» S pro- 

.yrtem, Sfprodociog cLSbl«T« 1™ ° Ver * C °'" ,tr ''' CmMe ' md " a ***" 



372 OI* THE IMMEDIATE CAUSES [ CH ' VI1 ' 

greatly stimulated by the consumption of those who 
have been supported by taxes. Yet taxation is a sti- 
mulus so liable in every way to abuse, and it is so ab- 
solutely necessary for the general interests of society 
to consider private property as sacred, that one should 
be extremely cautious of trusting to any government 
the means of making a different distribution of wealth, 
with a view to the general good. But when, either 
from necessity or error, a different distribution has 
taken place, and the evil, as far as it regaids private 
property, has actually been committed, it would surely 
be most unwise to attempt, at the expense of a great 
temporary sacrifice, a return to the former distribution, 
without very fully considering whether, if it were 
effected, it would be really advantageous; that is, 
whether, in the actual circumstances of the country, 
with reference to its powers of production, more 
would not be lost by the want of consumption than 
gained by the diminution of taxation. 

If there could be no sort of difficulty in finding 
employment for capital, provided the price of labour 
were sufficiently low, the way to national wealth, 
though it might not always be easy, would be quite 
straight, and our only object need be, to save from 
revenue, and repress unproductive consumers. But, 
if it has appeared that the greatest powers of pro- 
duction are rendered comparatively useless without ade- 
quate consumption, and that a proper distribution of the 
produce is as necessary to the continued increase of 
wealth as the means of producing it, it follows that, 
in cases of this kind, the question depends upon pro- 
portions ; and it would be the height of rashness to 
determine, under all circumstances, that the diminu- 
tion of a national debt and the removal of taxation, 
must necessarily tend to increase the national wealth, 
and provide employment for the labouring classes. 

If we were to suppose the powers of production m 
a rich and well peopled country, to be so increased, 
that the whole of what it produced could be obtain- 



SEC. IX.] OF THE PROGRESS OF WEALTH. 373 

ed by one third of the labour before applied, can 
there be a reasonable doubt that the principal difficul- 
ty would be to effect such a distribution of the pro- 
duce, as to call forth these great powers of produc- 
tion ? To consider the gift of such powers as an evil, 
would indeed be most strange ; but they would be an 
evil, and practically a great and grievous one, if the 
effect were to be an increase of the neat produce at 
the expense of the gross produce, and of the popula- 
tion. But if, on the other hand, a more favourable 
distribution of the abundant produce were to take 
place ; if the more intelligent among the working 
classes were raised into overseers of works, clerks of 
various kinds, and retail dealers, while many who 
had been in these situations before, together with 
numerous others who had received a tolerable educa- 
tion, were entitled to an income from the general pro- 
duce, and could live nearly at leisure upon their mort- 
gages ; what an improved structure of society would 
this state of things present ; while the value of the 
gross produce, and the numbers of the people, would 
be increasing with rapidity ! As 1 have before said, it 
would not be possible, under the principle of competi- 
tion, (which can never be got rid of,) to secure much 
more leisure to those actually engaged in manual 
labour ; but the very great increase in the number of 
prizes which would then be attainable by industrious 
and intelligent exertion, would most essentially 
improve their condition ; and; on the whole, the soci- 
ety would have gained a great accession of comfort 
and happiness. It is not meant to be stated that such 
a distribution of the produce could be easilv effected ; 
but merely that, with such a distribution, the powers 
supposed would confer a prodigious benefit on the 
society, and without such a distribution, or such a 
change of tastes as would secure an equivalent con- 
sumption, the powers supposed might be worse than 
thrown away. 



374 ON THE IMMEDIATE CAUSES [dl. VH. 

Now the question is, whether this country, in its 
actual state, with the great powers of production 
which it unquestionably possesses, does not bear some 
slight resemblance to the case here imagined; and 
whether without such a body of unproductive con- 
sumers as these who live upon the interest of the na- 
tional debt, the same stimulus would have been given 
to production, and the same powers would have been 
called forth. Under the actual division of landed 
property which now takes place in this country, I 
fee) no sort of doubt, that the incomes which are re- 
ceived and spent by the national creditors, are more 
favourable to the demand for the great mass of manu- 
factured products, and tend much more to increase 
the happiness and intelligence of the whole society, 
than if they were returned to the landlords. 
jj I am far, however, from being insensible to the 
evils of a great national debt. Though, in many 
respects, it may be a useful instrument of distribu- 
tion, it must be allowed to be a very cumbersome 
and very dangerous instrument. In the first place, 
the revenue necessary to pay the interest of such a 
debt can be raised only by taxation ; and, as this 
taxation, if pushed to any considerable extent, can 
hardly fail of interfering with the powers of pro- 
duction, there is always danger of impairing one 
element of wealth, while we are improving another. A 
second important objection to a large national debt, is, 
the feeling which prevails so very generally among all 
those not immediately concerned in it, and consequently 
among the great mass of the population, that they would 
be immediately and greatly relieved by its extinction ; 
and, whether this impression be well founded or not, 
it cannot exist without rendering such revenue in some 
degree insecure, and exposing a country to the risk of 
a great convulsion of property. A third objection to 
such a debt is, that it greatly aggravates the evils 
arising from changes in the value of money. When 
the currency falls in value, the annuitants, as owners 



SEC. IX.] OF THE PROGRESS OF WEALTH. 375 

of fixed incomes, are most unjustly deprived of their 
proper share of the national produce ; when the cur- 
rency rises in value, the pressure of the taxation 
necessary to pay the interest of the debt, may become 
suddenly so heavy as greatly to distress the produc- 
tive classes ;* and this kind of sudden pressure must 
very much enhance the insecurity of property vested 
m public funds. 

On these and other accounts it might be desirable 
slowly to diminish the debt, and to discourage the 
growth of it in future, even though it were allowed 
that its past effects had been favourable to wealth, 
and that the advantageous distribution of produce 
which it had occasioned, had, under the actual circum- 
stances, more than counterbalanced the obstructions 
which it might have given to commerce. Security 
with moderate wealth is a wiser choice, and better 
calculated for peace and happiness than insecurity 
with greater wealth. But, unfortunately, a country 
accustomed to a distribution of produce, which has at 
once excited and given full play to great powers of 
production, cannot withdraw into a less ambitious 
path without passing through a period of very ereat 
distress. J b 

It is, I know, generally thought that all would be 
well, if we could- but be relieved from the heavy 
burden of our debt. And yet I feel perfectly con- 
vinced that, if a spunge could be applied to it to-mor- 
row, and we could put out of our consideration the 
poverty and misery of the public creditors, by sup- 
posing them to be supported comfortably in some 

* In a country with a large public debt, there is no duty which ousrht to be held 
more sacred on the part of the administrators of the government, Zn to prevent 
any variation, of the currency beyond those which necessarily belong to ? Z iva 
rymg value of the precious metals. I am fully aware of the temporary g a dvant a ^ s 
which may be derived from a fall in the value of money; and perhans k mJ?K 
true that a part of the distress during the last year, though I bfffi HmaH 

?e, yToitrStTalue y b5 """" ^ ^^ ^ tS * -^-tiou of theTuH 
rency to its just value. But some such measure was indispeusably necessary an* 

Mr. R.cardo deserves the thanks of his country for having suggested on? wlXh hi 

rendered the transition more easy than could reasonably havlSn expected 



376 ON THE IMMEDIATE CAUSES [CH. VIIV 

other country, the rest of the society, as a nation, in- 
stead of being enriched, would be impoverished. It 
is the greatest mistake to suppose that the landlords 
and capitalists would either at once, or in a short time, 
be prepared for so great an additional consumption 
as such a change would require ; and if they adopted 
the alternative suggested by Mr. Ricardo in a former 
instance, of saving, and lending their increased in- 
comes, the evil would be aggravated tenfold. The 
new distribution of produce would diminish the de- 
mand for the results of productive labour ; and if, in 
addition to this, more revenue were converted into 
capital, profits would fall to nothing, and a much 
greater quantity of capital would emigrate, or be de- 
stroyed at home, and a much greater number of per- 
sons would be starving for want of employment, than 
before the extinction of the debt. It would signify 
little to be able to export cheap goods. If the distribu- 
tion of property at home were not such as to occasion 
an adequate power and will to purchase and consume 
the returns for these goods, the quantity of capital 
which could be employed in the foreign trade of con- 
sumption would be diminished instead of increased. 
Of this we may be convinced if we look to India, 
where low wages appear to be of little use in com- 
merce, while there are no middle classes of society to 
afford a market for any considerable quantity of 

foreign goods. 

The landlords, in the event supposed, not being 
inclined to an adequate consumption of the results of 
productive labour, would probably employ a greater 
number of menial servants ; and perhaps, in the actual 
circumstances, this would be the best thing that could 
be done, and indeed the only way of preventing great 
numbers of the labouring classes from being starved 
for want of work. It is by no means likely, howev- 
er, that it should soon take place to a sufficient 
extent; but if it were done completely, and the land- 
lords paid as much in wages to menial servants as 



SEC. IX.] OF THE PROGRESS OF WEALTH. 377 

they had before paid to the national creditors, could 
we for a moment compare the state of society which 
would ensue to that which had been destroyed ? 

With regard to the capitalists, though they would 
be relieved from a great portion of their taxes, yet 
there is every probability that their habits of saving, 
combined with the diminution in the number of ef- 
fective demanders, would occasion such a fall in the 
prices of commodities as greatly to diminish that 
part of the national income which depends upon pro- 
fits ; and I feel very little doubt that, in five years 
from the date of such an event, not only would the 
exchangeable value of the whole produce, estimated 
in domestic and foreign labour, be decidedly dimin- 
ished, but a smaller absolute quantity of corn would 
be grown, and fewer manufactured and foreign 
commodities would be brought to market than be- 
fore. 

It is not of course meant to be said that a country 
with a large quantity of land, labour, and capital, 
has not the means of gradually recovering itself from 
any shock, however great, which it may experience ; 
and after such an event, it might certainly place itself 
m a situation in which its property would be more 
secure than with a large national debt. All that I 
mean to say is, that it would pass through a period, 
probably of considerable duration, in which the 
diminution of effective demand from an unfavourable 
distribution of the produce would more than coun- 
terbalance the increased power of production occa- 
sioned by the relief from taxation ; and it may fairly 
be doubted whether finally it would attain a great 
degree of wealth, or call forth, as it ought, a great 
degree of skill in agriculture, manufactures, and 
commerce, without possessing, in some way or other, 
a large body of unproductive consumers, or supply- 
ing this deficiency by a much greater tendency to 
consume the results of productive labour than is gene- 
rally observed to prevail in society. 

48 



«. > 



:\ 




378 OiN THE IMMEDIATE CAUSES [CH. VII. 

It has been repeatedly conceded, that the produc- 
tive classes have the power of consuming all that they 
produce ; and, if this power were adequately exercis- 
ed, there might be no occasion, with a view to 
wealth, for unproductive consumers. But it is found 
by experience that, though there may be the power, 
there is not the will ; and it is to supply this will that 
V a body of unproductive consumers is necessary. 
Their specific use in encouraging wealth is to main* 
' tain such a balance between produce and consump- 
tion as to give the greatest exchangeable value to the 
results of the national industry. If unproductive 
labour were to predominate, the comparatively small 
quantity of material products brought to market 
would keep down the value of the whole produce, 
from the deficiency of quantity. If the productive 
classes were in excess, the value of the whole pro- 
duce would fall from excess of supply. It is obvi- 
ously a certain proportion between the two which 
will yield the greatest value, and command the great- 
est quantity of domestic and foreign labour ; and we 
may safely conclude that, among the causes necessary 
to that distribution, which will keep up and increase 
the exchangeable value of the whole produce, we 
must place the maintenance of a certain body of 
unproductive consumers. This body, to make it 
effectual as a stimulus to wealth, and to prevent it from 
being prejudicial, as a clog to it, should vary in diffe- 
rent "countries, and at different times, according to the 
powers of production ; and the most favourable result 
evidently depends upon the proportion between pro- 
ductive and unproductive consumers, being best suited 
to the natural resources of the soil, and the acquired 
tastes and habits of the people. 



SEC. X.] OF THE PROGRESS OF WEALTH. 379 



SECTION X. 

Application of some of the preceding Principles to the Dis- 
tresses of the Labouring Classes since 1815, with General 
Observations, 

It has been said that the distresses of the labouring 
classes since 1815 are owing to a deficient capital, 
which is evidently unable to employ all that are in 
want of work. That the capital of the country does 
not bear an adequate proportion to the population ; 
that the capital and revenue together do not bear so 
great a proportion as they did before 1815; and that 
such a disproportion will at once account for very 
great distress among the labouring classes, I am most 
ready to allow. But it is a very different thing to 
allow that the capital is deficient compared with the 
population ; and to allow that it is deficient compared 
with the demand for it, and the demand for the com- 
modities procured by it. The two cases are very 
frequently confounded, because they both produce 
distress among the labouring classes ; but they are 
essentially distinct. They are attended with some 
very different symptoms, and require to be treated in 
a very different manner. 

If one fourth of the capital of a country were sud- 
denly destroyed, or entirely transferred to a different 
part of the world, without any other cause occurring 
of diminished demand, this scantiness of capital would 
certainly occasion great distress among the working 
classes ; but it would be attended with great advanta- 
ges to the remaining capitalists. Commodities, in 
general, would be scarce, and bear a high price on 
account of the deficiency in the means of producing 
them. Nothing would be so easy as to find a profi- 
table employment for stock; but it would by no 
means be easy to find stock for the number of 
employments in which it was deficient ; and conse- 



380 ON THE IMMEDIATE CAUSES [CH. VII. 

quently the rate of profits would be very high. In 
this state of things, there would be an immediate and 
pressing demand for capital, on account of there being 
an immediate and pressing demand for commodities ; 
and the obvious remedy would be, the supply of the 
demand in the only way in which it could take place, 
namely, by saving from revenue to add to capital. 
Tnis supply of capital would, as I stated in a former 
section, take place just upon the same principle as a 
supply of population would follow a great destruction 
of people on the supposition of there being an ^ imme- 
diate and pressing want of labour evinced by the high 
real wages given to the labourer. 

On the other hand, if the capital of the country 
were diminished by the failure of some branches of 
trade, which had before been very prosperous, and 
absorbed a great quantity of stock ; or even if capital 
were suddenly destroved, and from peculiar circum- 
stances a period were to succeed of diminished con- 
sumption and slack demand, the state of things, with 
the exception of the distresses of the poor, would be 
almost exactly reversed. The remaining capitalists 
would be in no respect benefited by events which had 
diminished demand in a still greater proportion than 
they had diminished capital. Commodities would be 
every where cheap. Capital would be seeking 
employment, but would not easily find it ; and the 
profits of stock would be low. There would be no 
pressing and immediate demand for capital, because 
there would be no pressing and immediate demand 
for commodities ; and, under these circumstances, the 
saving from revenue to add to capital, instead of 
affording the remedy required, would only aggravate 
the distresses of the capitalists," and fill the strearn of 
capital which was flowing out of the country. The 
distresses of the capitalists would be aggravated, 
just upon the same principle as the distresses of 
the labouring classes would be aggravated, if they 
were encouraged to marry and increase, after a 
considerable destruction of people, although ac- 



SEC. X.] OF THE PROGRESS OP WEALTH. 381 

companied by a still greater destruction of capital 
which had kept the wages of labour very low 
Ihere might certainly be a great deficiency of popu- 
lation, compared with the territory and powers of 
the country, and it might be very desirable that it 
should be greater ; but if the wages of labour were 
still low, notwithstanding the diminution of people 
to encourage the birth of more children would be to 
encourage misery and mortality rather than popu- 

Now 1 would ask, to which of these two supposi- 
tions does the present state of this country bear the 
nearest resemblance ? Surely to the latter. That a. 
great loss of capital has lately been sustained, is 
unquestionable. During nearly the whole of the war 
owing to the union of great powers of production 
with great consumption and demand, the prodigious 
destruction of capital by the government was much 
more than recovered. To doubt this would be to 
shut our eyes to the comparative state of the country 
in 1792 and 1813. The two last years of the X 
were, however, years of extraordinary expense, and 
being followed immediately by a period marked by 
a very unusual stagnation of demand, the destruction 
of capital which took place in those years was not 
probably recovered. But this stagnation itself was 
much more disastrous in its effects upon the national 
capital, and still more upon the national revenue, than 
any previous destruction of stock. It commenced 
certainly with the extraordinary fall in the value of 
the raw produce of the land, to the amount, it is sup- 
posed, of nearly one third. When this fall had dimin- 
ished the capitals of the farmers, and still more the 
revenues both of landlords and farmers, and of all 
those who were otherwise connected with the land 
their power of purchasing manufactures and foreign 
products was of necessity greatly diminished. The 
failure of home demand filled the warehouses of the 
manufacturers with unsold goods, which urged them 
to export more largely at all risks. But this exces^ 



382 ON THE IMMEDIATE CAUSES [CH. VII. 

sive exportation glutted all the foreign markets, and 
prevented the merchants from receiving adequate 
returns ; while, from the diminution of the home rev- 
enues, aggravated by a sudden and extraordinary con- 
traction of the currency, even the comparatively scan- 
ty returns obtained from abroad found a very insuffi- 
cient domestic demand, and the profits and consequent 
expenditure of merchants and manufacturers were 
proportionally lowered. While these unfavourable 
changes were taking place in rents and profits, the 
powerful stimulus which had been given to popula- 
tion during the war continued to pour in fresh sup- 
plies of labour, and, aided by the disbanded soldiers 
and sailors and the failure of demand arising from the 
losses of the farmers and merchants, reduced generally 
the wages of labour, and left the country with a gen- 
erally diminished capital and revenue ;— not merely 
in proportion to the alteration of the value of the cur- 
rency, but in reference to the bullion value of its pro- 
duce, and the command of this bullioi value over 
domestic and foreign labour. For the four or five 
years since the war, on account of the change in 
the distribution of the national produce, and the 
want of consumption and demand occasioned by 
it, a decided check has been given to production, and 
the population, under its former impulse, has increas- 
ed, not onlv faster than the demand for labour, but 
faster than" the actual produce ; yet this produce, 
though decidedly deficient, compared with the popu- 
lation, and compared with past times, is redundant, 
compared with the effectual demand for it and the 
revenue which is to purchase it. Though labour is 
cheap, there is neither the power nor the will to em- 
ploy it all ; because not only has the capital of the 
country diminished, compared with the number of 
labourers, but, owing to the diminished revenues of 
the country, the commodities which those labourers 
would produce are not in such request as ensure tole- 
rable profits to the reduced capital. 



SEC. X.] OF THE PROGRESS OF WEALTH. 383 

But when profits are low and uncertain, when can- 
itahsts are quite at a loss where they can safely em- 
ploy their capitals, and when on these accounts capital 
is flowing out of the country ; in short, when all the 
ev.dence which the nature of the subject admits, dis- 
tinctly proves that there is no effective demand for 
capital at home, is it not contrary to the general prin- 
c.ples of political economy, is it not a vain and fruit- 
less opposition to that first, greatest, and most univer- 
sal of ail its principles, the principle of supply and 
demand, to recommend saving, and the conversion of 
more revenue into capital ? Is it not just the same 
sort of thing as to recommend marriage when neoDle 
are starving and emigrating ? s P P 

,t, l T*" 11 / aW c d i e £ at the Iow P rofits of stock, and 
the difficulty of finding employment for it, which I 

consider as an unequivocal proof that the immediate 
want of the country is not capital, has been attributed 
to other causes ; but to whatever causes they may be 
attributed, an increase in the proportion of capital to 
revenue must aggravate them. With regard to these 
causes, such as the cultivation of our poor soils, om 
restrictions upon commerce, and our weight of taxa- 
tion, I find ,t very difficult to admit a theory of our 
distresses so inconsistent with the theory of our pros 
penty. Whi e the greatest quantity of our poor Q 
were ,n cultivation ; while there were more than 
usual restrictions upon our commerce, and verv little 
corn was imported ; and while taxation was'at ts 
height, the country confessedly increased in wealth 
with a rapidity never known before. Since solue of 
our poorest lands have been thrown out of cuMva- 
uon ; since the peace has removed many of the restric 
tions upon our commerce, and, notwithstanding our 
corn laws, we have imported a great quantity of corn 
and since seventeen millions of taxes have been taken 
off from the people, we have experienced a de-ree of 
distress, the pressure of which has been almost* i„tol 



384 ON THE IMMEDIATE CAUSES [CH. VII. 

I am very far from meaning to infer from these 
striking facts that restrictions upon commerce and 
heavy taxation are likely in general to be beneficial to 
a country. But the facts certainly shew that, what- 
ever may be the future effect of the causes above allud- 
ed to in checking the progress of our wealth, we must 
look elsewhere for the immediate sources of our pre- 
sent distresses. How far our artificial system, and 
particularly the changes in the value of our currency 
operating upon a large national debt, may have aggra- 
vated the evils we have experienced, it would be 
extremely difficult to say. But I feel perfectly con- 
vinced that a very considerable portion of these evils 
might be experienced by a nation without poor land 
in cultivation, without taxes, and without any fresh 
restrictions on trade. 

If a large country, of considerable fertility, and 
sufficient inland communications, were surrounded 
by an impassable wall, we all agree that it might be 
tolerably rich, though not so rich as if it enjoyed the 
benefit of foreign commerce. Now, supposing such 
a country gradually to indulge in a considerable con- 
sumption, to call forth and employ a great quantity 
of ingenuity in production, and to save only yearly 
that portion of its revenue which it could most 
advantageously add to its capital, expending the rest 
in consumable commodities and unproductive labour, 
it might evidently, under such a balance of produce 
and consumption, be increasing in wealth and popu- 
lation with considerable rapidity. But if, upon the 
principle laid down by M. Say, that the consumption 
of a commodity is a diminution of demand, the 
society were greatly and generally to slacken their 
consumption, and add to their capitals, there cannot 
be the least doubt, on the great principles of demand 
and supply, that the profits of capitalists would soon 
be reduced to nothing, though there were no poor 
land in cultivation; and the population would be 
thrown out of work and would be starving, although 
without a single tax, or any restrictions on trade. 



SEC. X.~] OF THE PROGRESS OF WEALTH. 385 

The state of Europe and America raav perhaps be 
said, in some points, to resemble the case here sup- 
posed ; and the stagnation which has been so gene- 
rally felt and complained of since the war, appears 
to me inexplicable upon the principles of those who 
think that the power of production is the only element 
ot wealth, and who consequently infer that if the 
powers of production be increased, wealth will cer- 
tainly increase m proportion. Now it is unquestion- 
able that the powers of production were increased by 
the cessation of war, and that more people and more 
capital were ready to be employed in productive 
labour ; but notwithstanding this obvious increase in 
the powers of production, we hear every where of 

7 n ^ d f esses ' instead of case and plenty. 
In the United States of America in particular, a 
country of extraordinary physical resources, the diffi- 
cult, es which have been experienced are very striking, 
and such certainly as could hardly have been expect- 

tn Vh if dl ® cul * es > at least > cannot be attributed 
to the cultivation of poor land, restrictions upon com- 
merce, and excess of taxation. Altogether the state 
ot th e commercial world, since the war, clearly shews 
that something else is necessary to the continued 
increase of wealth besides an increase in the power 
ot producing. * 

That the transition from war to peace, of which 
so much has been said, is a main cause of the effects 

oner Zt ' ^ K "^ * UoW * d > but "<* ™ th. 
that t L u USUM l ex P laiued - ^ is generally said 
that there has not been time to transfer capital from 

where7-° y r« n - S Whwe h is ^dundan^ to tho2 
where it ,s deficient, and thus to restore the proper 

that this transfer can require so much time as has now 
elapsed since the war ; and I would again ask, where 
are the tinder-stocked employments, S ich, ac ording 
to this theory, ought to be numerous, and fully ca* 
pable of absorbing all the redundant capital which 

49 



/ ; 






386 ON THE IMMEDIATE CAUSES [CH. VII. 

is confessedly glutting the markets of Europe in so 
many different branches of trade ? It is well known 
by the owners of floating capital, that none such are 
now to be found ; and if the transition in question is 
to account for what has happened, it must have pro- 
duced some other effects besides that which arises 
from the difficulty of moving capital. This I con- 
ceive to be a great diminution of the whole amount 
of consumption and demand. The necessary changes 
in the channels of trade would be effected in a year 
or two ; but the general diminution of consumption 
and demand, occasioned by the transition from such 
a war to a peace, may last for a very considerable time. 
The returned taxes, and the excess of individual 
gains above expenditure, which were so largely used 
as revenue during the war, are now in part, and 
probably in no inconsiderable part, saved. I cannot 
doubt, for instance, that in our own country very 
many persons have taken the opportunity of saving 
a part of their returned property-tax, particularly 
those who have only life-incomes, and who, contrary 
to the principles of just taxation, had been assessed 
at the same rate with those whose incomes were de- 
rived from realized property. This saving is quite 
natural and proper, and forms no just argument 
against the removal of the tax ; but still it contributes 
to explain the cause of the diminished demand for 
commodities, compared with their supply since the 
war. If some of the principal governments concern- 
ed spent the taxes which they raised, in a manner to 
create a greater and more certain demand for labour 
and commodities, particularly the former, than the 
present owners of them, and if this difference of ex- 
penditure be of a nature to last for some time, we 
cannot be surprised at the duration of the effects 
arising from the transition from war to peace. 

The diminished consumption however, which has 
taken. place so generally, must have operated very 
differently upon the different countries of the com- 



SEC. X.] OF THE PROGRESS OP WEALTH. 387 

mercial world, according to the different circumstan- 
ces in which they were placed ; and it will be found 
generally, as the principles which have been laid 
down would lead us to expect, that those states which 
have suffered the most by the war have suffered the 
least by the peace. In the countries where a great 
pressure has fallen upon moderate or scanty powers 
of production it is hardly possible to suppose that 
their wealth should not have been stopped in its pro- 
gress during the war, or perhaps rendered positively 
retrograde. Such countries must have found relief 
trosn that diminution of consumption, which now al- 
lows them to accumulate capital, without which no 
state can permanently increase in wealth. But in 
those countries, where the pressure of the war found 
great powers of production, and seemed to create 
much greater ; where accumulation, instead of being 
checked, was accelerated, and where the vast con- 
sumption of commodities was followed by supplies 
which occasioned a more rapid increase of wealth 
than was ever known before, the effect of peace 
would be very different. In such countries it is na- 
tural to suppose that a great diminution of consump- 
tion and demand would decidedly check the progress 
ot wealth, and occasion very general and severe^dis- 
tress both to capitalists and the labouring classes. 
England and America come the nearest to the coun- 
tries of this latter description. They suffered the 
least by the war, or rather were enriched by it, and 
they are now suffering the most by the peace. 

1 cannot but consider it as a very unfortunate cir- 
cumstance that any period should ever have occurred 
in which peace should appear to have been, in so 
marked a manner, connected with distress : but it 
should always be recollected that it is owing to the 
very peculiar circumstances attending the late war 
that the contrast has been so striking. It was very 
different m the American and former wars ; and if 
the same exertions had been attempted, without the 



388 ON THE IMMEDIATE CAUSES [CH. VII. 

same powers of supporting them, that is, without 
the command of the greatest part of the commerce 
of the world, and a more rapid and successful pro- 
gress in the use of machinery than was ever before 
known, we might have been in a state to have felt 
the greatest relief at the cessation of hostilities. 
When Hume and Adam Smith prophesied that a, little 
increase of national debt beyond the then amount of 
it, would probably occasion bankruptcy ; the main 
cause of their error was the very natural one, of not 
being able to see the vast increase of productive 
power to which the nation would subsequently attain. 
An expenditure, which would have absolutely crushed 
the country in 1770, might be little more than what 
was necessary to call forth its prodigious powers of 
production in 1816. But just in proportion to this 
power of production, and *o the facility with which a 
vast consumption could be supplied, consistently with 
a rapid accumulation of capital, would be the dis- 
tress felt by capitalists and labourers upon any great 
and sudden diminution of expenditure. 

On this account, there is reason to doubt the policy 
of raising the supplies of a long and expensive war 
within the year, a policy which has been recommend- 
ed by very able writers. If the country were poor, 
such a system of taxation might completely keep 
down its efforts. It might every year positively 
diminish its capital, and render it every year more 
ruinous to furnish the same supplies ; till the country 
would be obliged to submit to its enemies from the 
absolute inability of continuing to oppose them with 
effect. On the other hand, if the country were rich, 
and had great powers of production, which were like- 
ly to be still further called forth by the stimulus of a 
great consumption, it might be able to pay the heavy 
taxes imposed upon it, out of its revenue, and yet find 
the means of adequate accumulation ; but if this pro- 
cess were to last for any time, and the habits of the 
people were accommodated to this scale of public and 



SEC. X.] OF THE PROGRESS OF WEALTH. 389 

ETat TrfZV 1 iS SCarCel ? P° ssibIfi to doubt 
axes w H , ° f *£ War ' Whe " SO Iar g e a "»« of 

he i nT tf °" C / bC J reSt ° red t0 the P»^ of them, 
thejust balance of produce and consumption would 

be completely destroyed, and a period would ensue 

longer or shorter, according to circumstances, in which 

a very great stagnation would be felt in every branch 

of productwe industry, attended by its usual LnlZt 

nTa fax e L v dlStr6SS - , ThC CViI ° CCasi0nefl ^ ^Po- 
ol Wp i II Van]y «; om P e ^ated by the taking it 
dLv^f J cons ?ntly keep in mim l that the t | n . 

de„cy to expenditure m individuals has most formida- 
ble antagonists ,„ the love of indolence, and ™ the 

Sde forTf '" I 01 '" 6 '" £ f *' thdr - nditi0 « ^ 
provide for a family ; and that all theories founded 

upon the assumption, that mankind always produce 

and consume as much as they have the poweMo pro! 

fitoS ^heT me ' ^K fOUDded UP °" a WaHt °' k - W " 
ledge ot the human character, and of the motives hv 

which it is usually influenced. D> 

that' TheM-f I''' r r u hapS ' that asit is a ''knowledged 
that the capita of this country compared with the 

population has been diminished since the war partly 

by the uncovered destruction which it sustained ur- 

mg the last two years of the contest, but stil more by 

oc urred IT?' C ° r ' SUm P tio » a »° dem m d Wh3 
occurred on its termination ; how is the lost canital 
ever to be recovered, if we are not active n accumu 
lation ? I am very far indeed from saying a " 

To £ r u n u,ate - h i s perfectl ? true &<£•* 

no other possible way of recovering our lost canital 

ha„ hy accumulation. All that iVan to sa? £ 

that, ,n looking to this most desirable object, the recov-' 

d ctaTe TZlf OUr f Ca P ita] ' tve^ou'ld listen toX 

3i i- SC grea . e generaI ,aws w bich do not 
often fail to direct us in the right course. If „„„„"". 

tion were ever so deficient in a state compared w th 
its territory, yet if the wages of labour still continued 
very scanty, and the people were emigrating, the^at 



390 ON THE IMMEDIATE CAUSES [CH. VII. 

general laws of demand and supply would instruct us 
that some previous change in the state of things was 
necessary, before we ought to wish for an increased 
proportion of marriages, which in fact, under the 
actual circumstances, would not accomplish the object 
aimed at In the same manner, if a portion of our 
profits be destroyed, and yet the profits of the remain- 
der are low, and its employment attended with such 
frequent losses as, joined to its tendency to emigrate, 
make it stationary or even retrograde ; surely the 
great general laws of demand and supply cannot more 
clearly shew us that something else is wanted before 
we can accumulate with effect. 

What is now wanted in this country is an increased 
national revenue,— an increase in the exchangeable 
value of the whole produce estimated in bullion,— and 
in the command of this bullion over domestic and 
foreign labour. When we have attained this, which 
can only be attained by increased and steady profits, 
we may then begin again to accumulate, and our 
accumulation will then be effectual. But if, instead 
of saving from increased profits, we save from dimin- 
ished expenditure ; if, at the very time that the sup- 
ply of commodities compared with the demand for 
them, clearly admonishes us that the proportion of 
capital to revenue is already too great, we go on 
saving from our revenue to add still further to our 
capital, all general principles concur in shewing that 
we must of necessity be aggravating instead of alle- 
viating our distresses. 

But how, it will be asked, are we to obtain this 
increase of revenue ? What steps are we to take 
in order to raise the exchangeable value of the whole 
produce, and prepare the way for the future saving 
which is acknowledged to be necessary? lnese 
questions I have endeavoured to answer m the latter 
Section of this very long Chapter On the immediate 
Causes of the Progress of Wealth, where it has 
appeared that a union of the means of distribution 



SEC. X.] op the PROGRESS OF WEALTH. 391 

Srr^ P ° We A ° f P roduction ^ absolutely necessary 
to create an adequate stimulus to the continued in- 
crease of wealth ; and that the three causes, which 
hy favouring distribution, tend most to keep Twd 
increase the exchangeable value of the whohfpro 
duce, are, the division of landed property ,™h7exE 
sion of domestic and foreign trade, and the maS 
nance of unproductive labourers. 

The mention of these causes is alone sufficient to 

onluHhan^r ""^ ** Wkhi " ° Ur ^ * 
contioul than the common process of accumulation 

If it were true that, in order to employ all that are Z 
of work and to create at the sanL time a s ufficien 
market for what they produce, it is only necess arv 
that a little more should be saved from L Revenue 

ad si 1° the Ca P ital of th * country, I am fiX 
persuaded that this species of charity would not warn 
contributors, and that a change would I soon £ 

Z?^ 1D th f C ° ndition of the I-bS ^ ring dasse S 
But when we know, both from theory and exnlrf' 
ence that this proceeding will „ ot afford the relLf 
sought for, and are referred to an increase in hi 

SeThth Va ' Ue ° fthe wh * P r ° d "^ X 
cause which can restore a healthy and effect!™ 

demand for labour, it must be allowed that we ma' 
wo„ u\ S !i """k, reSpeCt t0 the first «teps which It 
S; d w b e e wtr ble t0 takC ' ln ° rder ^accomplish 1 
Still however, it is of the utmost importance tn 
know the immediate object which oughUobe aimed 
w Lai IT f Ca " d ° but lhtle actu 4 to forwa ™ " 

wltHLrd to r fi Ig f° ranCe ' d ° much t0 ret ^d i 
vvitn regard to the first main cause which I have m*n 

of the d 'nT en f " g j° ^ase the exchangeabL vafoe 

pronertTlTi FOdUCe ' "^ the di ™ "S 



892 ON THE IMMEDIATE CAUSES [QH. VII. 

which a different division of land could be effected, 
consistently with an adequate respect for the great 
fundamental law of property, on which all progress 
in civilization, improvement, and wealth, must ever 
depend. But if the distribution of wealth to a certain 
extent be one of the main causes of its increase, 
while it is unadvisable directly to interfere with the 
present division of land in this country, it may justly 
become a question, whether the evils attendant on the 
national debt are not more than counterbalanced by 
the distribution of property and increase of the middle 
classes of society, which it must necessarily create ; 
and whether by saving, in order to pay it off, we are 
not submitting to a painful sacrifice, which, if it 
attains its object, whatever other good it may effect, 
will leave us with a much less favourable distribution 
of wealth ? By greatly reducing the national debt, 
if we are able to accomplish it, we may place our- 
selves perhaps in a more safe position, and this no 
doubt is an important consideration ; but grievously 
will those be disappointed who think that, either by 
"reatly reducing or at once destroying it, we can 
enrich ourselves, and employ all our labouring classes. 
With regard to the second main cause of an increase 
in the exchangeable value of the whole produce- 
namely, the extension of domestic and foreign trade, 
it is well known that we can by no means command 
either of these at pleasure, but we may do much to 
impede both. We cannot indeed reasonably attribute 
anv sudden deficiency of trade to causes which have 
been of long duration ; yet there can be little doubt 
that our commerce has been much impaired by unne- 
cessary restraints, and that much benefit might be 
derived from the removal of them. While it is neces- 
sary to raise a large sum by taxation for the expenses 
of the government and the payment of the interest ot 
the national debt, it would by no means be advisable 
to neglect so fair and fruitful a resource as the cus- 
toms. In regulating these taxes, it is also natural 



SEC. X.] OF THE PROGRESS OF WEALTH. 393 

that those foreign commodities should be taxed the 
highest, which are either of the same kind as the 
native commodities which have been taxed, or such 
as, for special reasons of health, happiness, or safety, 
it is desirable to grow largely at home. But there 
seems to be no reason for the absolute prohibition of 
any commodities whatever ; and there is little doubt 
that, upon this principle, a much greater freedom 
might be given to foreign commerce, at the same time 
that a greater revenue might be derived from the cus- 
toms. I have already stated, in more places than 
one, why, under all the circumstances of the case, 
I think it desirable that we should permanently 
grow nearly our own consumption of corn. But 1 
see no sufficient cause why we should permanently 
prefer the wines of Portugal and the silks of London 
to the wines and silks of France. For the same rea- 
son that more British capital and labour is even now 
employed in purchasing claret than would be employ- 
ed in attempting to make it at home, we might fairly 
expect that, in the case of an extended trade with 
France, more British capital would be employed in 
purchasing the wines and silks of France, than is now 
employed in purchasing the wines of Portugal and 
making the silks of Spitalfields and Derby. 

At the same time it should be remarked, that, in 
looking forward to changes of this kind, it is always 
incumbent upon us, particularly in the actual situation 
of our people, to attend to the wise caution suggested 
by Adam Smith. Fully convinced of the benefits of 
unrestrained trade, he observes, that " The case in 
which it may sometimes be a matter of deliberation, 
how far, and in what manner, it is proper to restore 
the free importation of foreign goods, after it has been 
for some time interrupted, is, when particular manu- 
factures, by means of high duties and prohibitions 
upon all foreign goods which can come into compe- 
tition with them, have been so far extended as to 
employ a great multitude of hands. Humanity may 

50 



394 ON THE IMMEDIATE CAUSES [CH. VII* 

in this case require that the freedom of trade should 
be restored only by slow gradations and with a good 
deal of reserve and circumspection. Were these high 
duties and prohibitions taken away all at once, cheap- 
er foreign goods of the same kind might be poured so 
fast into the home market as to deprive all at once 
many thousands of their ordinary employment and 
means of subsistence."* The caution here given by 
Adam Smith certainly applies in a very marked man- 
ner to the silk trade ; and, however desirable it may 
be (and it is so most unquestionably) to open the 
trade with France, a sudden and incautious admission 
of a large quantity of French silks would tend to 
aggravate, instead of to relieve the present distresses 
of our working classes. 

In all cases where, under peculiar circumstances, 
the distress of the country would be aggravated by 
the opening of certain trades, which had before been 
subject to restrictions, the exchangeable value of the 
whole produce estimated in domestic and foreign 
labour would for a time be diminished. But, in general, 
as I have endeavoured to shew in the 8th Section of 
this Chapter, the natural and permanent tendency of 
all extension of trade both domestic and foreign, is to 
increase the exchangeable value of the whole pro- 
duce. This is more especially the case when, instead 
ot changing the channels of commerce, we are able 
to make large and distinct additions to them. The 
good is then unallayed by partial and temporary evil. 
This better distribution of the produce of the country, 
this better adaptation of it to the wants and tastes of 
the consumers, will at once give it a greater market 
value, and at once increase the national revenue, the 
rate of steady profits, and the wages of labour. 

With regard to the third cause of an increase in 
the exchangeable value of the whole produce, the 
maintenance of Unproductive consumers — though 

* Wealth of Nations, Book iv. ch. vii. p. 202. 6th edit. 



9EC. X.] OF THE PROGRESS OF WEALTH. 395 

many have no power to be of use in this respect, 
others may do something ; and it must certainly be 
advantageous that the truth, whatever it may be, re- 
lating to the effects of unproductive labour, should 
be fully known, that we may not aim at what will 
obstruct the progress of wealth, and clamour at what 
is calculated to advance it. Whatever it may be 
thought advisable to do respecting the diminution of 
unproductive consumers, with a view to the placing 
ourselves in a safer position, we shall be led to pro- 
ceed with more deliberation, if we are not hurried on 
by the impression that, by this diminution, we are 
affording immediate relief to the labouring classes. 

It is also of importance to know that, in our en- 
deavours to assist the working classes in a period like 
the present, it is desirable to employ them in unpro- 
ductive labour, or at least in labour, the results of 
which do not come for sale into the market, such as 
roads and public works. The objection to employ- 
ing a large sum in this way, raised by taxes, would 
not be its tendency to diminish the capital employed 
in productive labour ; because this, to a certain extent, 
is exactly what is wanted ; but it might, perhaps, 
have the effect of concealing too much the failure of 
the national demand for labour, and prevent the popu- 
lation from gradually accommodating itself to a re- 
duced demand. This' however might be, in a con- 
siderable degree, corrected by the wages given. And 
altogether I should say, that the employment of the 
poor in roads and public works, and a tendency 
among landlords and persons of property to build, to 
improve and beautify their grounds, and to employ 
workmen and menial servants, are the means most 
within our power and most directly calculated to 
remedy the evils arising from that disturbance in the 
balance of produce and consumption, which has been 
occasioned by the sudden conversion of soldiers, sailors, 
and various other classes which the war employed, 
into productive labourers. 



396 ON THE IMMEDIATE CAUSES [CH. VII. 

If by the operation of these three causes, either 
separately or conjointly, we can make the supply and 
consumption bear a more advantageous proportion to 
each other, so as to increase the exchangeable value 
of the whole produce, the rate of profits may then 
permanently rise as high as the quality of the soil in 
cultivation combined with the actual skill of the cul- 
tivators will allow,* which is far from being the case 
at present. And as soon as the capitalist can begin 
to save from steady and improving profits, instead of 
from diminished expenditure, that is, as soon as the 
national revenue, estimated in bullion, and in the 
command of this bullion over domestic and foreign 
labour, begins yearly and steadily to increase, we 
may then begin safely and effectively to recover our 
lost capital by the usual process of saving a portion 
of our increased revenue to add to it. 

It is, I believe, the opinion of many persons, par- 
ticularly among the mercantile classes, that nothing 
would so soon and so effectively increase the revenue 
and consumption of the country as a free issue of paper. 
But in holding this opinion, they have mistaken the 
nature of the great advantage which the national 
wealth may sometimes unquestionably derive from a 
fall in the value of the currency. The specific effect 
of this fall is to take aw r ay property from those who 
have fixed incomes, and give a greater command 
over the produce of the country to those who buy 
and sell. When the state of the national expenditure 
is such that there is a difficulty of supplying it, then 
whatever tends to throw a greater proportion of the 
produce into the hands of capitalists, as it must in- 
crease the power of production, must be just calcu- 
lated to supply what is wanted. And, though the 

* The profits of stock cannot be higher than the state of the land will allow, but 
they may be lower in any degree, (see p 234 ) The great differeuce between Mr. 
Ricardoand me on thid point is, that Mr. Ricardo thinks profits are regulated by 
the state of the land ; I think they are only limited by it one way, and that if 
capital be abundant, compared witli the demand for commodities, profits may be 
low in any degree, in spite of the fertility of the land. 



SEC. X.] OF THE PROGRESS OF WEALTH. 397 

continuation of the act of restriction beyond the im- 
mediate necessity of the case, can hardly be consider- 
ed in any other light than as an act of positive injus- 
tice towards the possessors of fixed incomes ; yet I 
can feel very little doubt that the fall in the value of 
money, and the facility of credit which it occasioned, 
acting in the way described, must have contributed 
greatly to that rapid recovery of vast capital destroyed, 
which, in the same degree, never probably occurred 
in the history of any nation before. 

But, if we were now to make similar issues of 
paper, the effect would be very different. Perhaps a 
sudden increase of currency and a new facility of 
borrowing might, under any circumstances, give a 
temporary stimulus to trade, but it would only be 
temporary. Without a large expenditure on the part 
of the government, and a frequent conversion of 
capital into revenue, the great powers of production 
acquired by the capitalists, operating upon the dimin- 
ished power of purchasing possessed by the owners 
of fixed incomes, could not fail to occasion a still 
greater glut of commodities than is felt at present • 
and experience has sufficiently shewn us, that paper 
cannot support prices under such circumstances. In 
the history of our paper transactions, it will be found 
that the abundance or scantiness of currency has fol- 
lowed and aggravated high or low prices, but seldom 
or never led them ; and it is of the utmost importance 
to recollect that, at the end of the war, the prices 
failed before the contraction of the currency began 
It was, in fact, the failure of prices, which destroyed 
the country banks, and shewed us the frail founda- 
tions on which the excess of our paper-currency 
rested. This sudden contraction no doubt aggravated 
very greatly the distresses of the merchants and of 
the country ; and for this very reason we should use 
our utmost endeavours to avoid such an event in 
future; not, however, by vain efforts to keep up 
prices by forcible issues of paper, in defiance at once 



398 ON THE IMMEDIATE CAUSES [CH. VII. 

of the laws of justice and the great principles of sup- 
ply and demand, but by the only effectual way, that 
of steadily maintaining our paper of the same value 
with the coin which it professes to represent, and 
subjecting it to no other fluctuations than those which 
belong to the precious metals. 

In reference to the main doctrine inculcated in the 
latter part of this work, namely, that the progress of 
wealth depends upon proportions ; it will be object- 
ed, perhaps, that it necessarily opens the way to dif- 
ferences of opinion relating to these propositions, and 
thus throws a kind of uncertainty over the science of 
political economy which was not supposed to belong 
to it. If, however, the doctrine should be found, upon 
sufficient examination, to be true; if it adequately 
accounts for things as they are, and explains consist- 
ently why frequent mistakes have been made respect- 
ing the future, it will be allowed that such objectors 
are answered. We cannot make a science more cer- 
tain by our wishes or opinions ; but we may obvious- 
ly make it much more uncertain in its application, by 
believing it to be what it is not. 

Though we cannot, however, lay down a certain 
rule for growing rich, and say that a nation will 
increase in wealth just in the degree in which it saves 
from its revenue, and adds to its capital : yet even 
in the most uncertain parts of the science, even in 
those parts which relate to the proportions of produc- 
tion and consumption, we are not left without guides ; 
and if we attend to the great laws of demand and 
supply, they will generally direct us into the right 
course. It is justly observed by Mr. Ricardothat " the 
farmer and manufacturer can no more live without 
profit than the labourer without wages. Their mo- 
tive for accumulation will diminish with every diminu- 
tion of profit, and will cease altogether when their 
profits are so low as not to afford them an adequate 
compensation for their trouble, and the risk which 
they must necessarily encounter in employing their 



3EC. X.] OF THE PROGRESS OF WEALTH. 39& 

capital productively."* Mr. Ricardo applies this pas- 
sage to the final and necessary fall of profits occasion- 
ed by the state of the land. I would apply it at all times, 
throughout all the variable periods which intervene 
between the first stage of cultivation and the last. 
Whenever capital increases too fast, the motive to 
accumulation diminishes, and there will be a natural 
tendency to spend more and save less. When profits 
rise, the motive to accumulation will increase, and 
there will be a tendency to spend a smaller proportion 
of the gams, and to save a greater. These tendencies, 
operating on individuals, direct them towards the just 
mean, which they would more frequently attain if 
they were not interrupted by bad laws or unwise 
exhortations. If every man who saves from his income 
is necessarily a friend to his country, it follows that 
all those who spend their incomes, though they may 
not be absolute enemies, like the spendthrift must be 
considered as failing in the duty of benefiting their 
country, and employing the labouring classes when 
it is in their power ; and this cannot be an agreeable 
reflection to those whose scale of expenditure in their 
houses, furniture, carriages and table, would certainly 
admit of great retrenchment, with but little sacrifice 
of real comfort. But if, in reality, saving is a nation^ 
al benefit, or a national disadvantage, according to the 
circumstances of the period ; and, if these circumstan- 
ces are best declared by the rate of profits, surely it"s 
a case ,n which individual interest needs no extrane! 
ous assistance. ue 

. Saving, as I have before said, is, in numerous 
instances, a most sacred private duty. How far a 
jus sense of this duty, together with the desire of 
bettering our condition so strongly implanted in the 
human breast, may sometimes, and in some states of 
society, occasion a greater tendency to parsimony than 
is consistent w,th the most effective encouragement 

* Princ. of Polit. Ecoo. ch. tL p. 127. 



400 ON THE IMMEDIATE CAUSES [CH. VII. 

to the growth of public wealth, it is difficult to say ; 
but whether this tendency, if let alone, be ever too 
great or not, no one could think of interfering with it, 
even in its caprices. There is no reason, however, 
for giving an additional sanction to it, by calling it a 
public duty. The market for national capital will be 
supplied, like other markets, without the aid of pat- 
riotism. And in leaving the whole question of saving 
to the uninfluenced operation of individual interest 
and individual feelings, we shall best conform to that 
great principle of political economy laid down by 
Adam Smith, which teaches us a general maxim, 
liable to very few exceptions, that the wealth of 
nations is best secured by allowing every person, as 
long as he adheres to the rules of justice, to pursue his 
own interest in his own way. 

Still it must be allowed that this very doctrine, and 
the main doctrines of the foregoing work, all tend to 
shew, as was stated in the Introduction, that the sci- 
ence of political economy bears a nearer resemblance 
to the sciences of morals and politics, than to the 
science of mathematics. But this truth, though it 
detracts from its certainty, does not detract from its 
importance. While the science of political economy 
involves some of the questions which have the nearest 
connection with the well-being of society, it must 
always be a subject of the highest interest. The study 
of it is calculated to be of great practical use, and to 
prevent much positive evil. And if its pr nciples be 
carefully founded on an experience sufficiently extend- 
ed, we have good reason to believe, from what they 
have already done, that, when properly applied, they 
will rarely disappoint our just expectations. 

There is another objection which will probably be 
made to the doctrines of the latter part of this work, 
which I am more anxious to guard against. If the 
principles which I have laid down be true, it will 
certainly follow that the sudden removal of taxes will 
often be attended with very different effects, particu- 



SEC. X.] OF THE PROGRESS OF WEALTH. 401 

4 

Jarly to the labouring classes of society, from those 
which have been generally expected. And an infer- 
ence may perhaps be drawn from this conclusion in 
favour of taxation. But the just inference from it is, 
that taxes should never be imposed, nor to a greater 
amount, than the necessity of the case justifies, and 
particularly that every effort should be made, consist- 
ently with national honour and security, to prevent a 
scale of expenditure so great that it cannot proceed 
without ruin, and cannot be stopped without dis- 
tress. 

Even if it be allowed that the excitement of a pro- 
digious public expenditure, and of the taxation neces- 
sary to support it, operating upon extraordinary 
powers of production, might, under peculiar circum- 
stances, increase the wealth of a country in a greater 
degree than it otherwise would have increased • yet 
as the greatest powers of production must finally be 
overcome by excessive borrowing, and as increased 
misery among the labouring classes must be the con- 
sequence, whether we go on or attempt to return, it 
would surely have been much better for the society 
it such wealth had never existed. It is like the un- 
natural strength occasioned by some violent stimulant, 
which, it not absolutely necessary, should be by all 
means avoided, on account of the exhaustion which 
is sure to follow it. 

.< T h Vu he E u S ? y ° n Po P ulation I have ciserved, that 
In the whole compass of human even'* I doubt if 
there be a more fruitful source of misery* ;>r one more 
invariably productive of disastrous consciences, than 
a sudden start of population from two or three years 
ot plenty, which must necessarily be repressed by the 
hrst return of scarcity, or even by average crops."* 
1 he great demand for labour which took place during 
the war must have had an effect precisely of a similar 
kind, and only aggravated by duration : and as this 



* Vol. ii. p. 170. 4th edit. 

51 



ON THE IMMEDIATE CAUSES [CH. VII. 

is a state of things which cannot, in its nature continue, 
it is obviously the duty of all governments, if they 
have any regard for the happiness of their subjects* 
to avoid all wars and excessive expenditure as far as 
it is possible ; but if war be unavoidable, so to regu- 
late the necessary expenditure as to occasion the least 
pressure upon the people during the contest, and the 
least convulsion in the state of the demand at the 
termination of it. We may have good reason to la- 
ment that such taxation and consumption should ever 
have taken place, and that so great an impetus, which 
could only be temporary, should have been given to 
the wealth and population of the country ; but it is 
a very different question, what is the best remedy now 
that the evil is incurred ? If the population had made 
a start during a few years of plenty, we should surely 
make great "efforts to prevent, by importation, the 
misery which would be occasioned by the sudden re- 
turn of average crops. If the human body had been 
subjected to a very powerful stimulus, we should 
surely be cautious not to remove it too suddenly. 
And, if the country had been unfortunately subjected 
to the excitement of a long continuance of excessive 
expenditure, it surely must be against all analogy 
and all general principles, to look for the immediate 
remedy of it in a great and sudden contraction of con- 
sumption, i 

There is^very reason to believe that the working 
classes of Neiety would be severely injured by attain- 
ing the otp u ct which they seem so ardently to wish 
for. To tTfose who live upon fixed incomes, the re- 
lief from taxation is a great and unmixed good; to 
the mercantile and trading classes it is sometimes 
a good and sometimes an evil, according to circum- 
stances ; but to the working classes, no taking off of 
taxes, nor any degree of cheapness of corn, can com- 
pensate a want of demand for labour. If the gene- 
ral demand for labour fail, particularly if the 
failure be sudden, the labouring clashes will be 
wretched in the midst of cheapness ; if the demand 



SEC. X.] OP THE PROGRESS OF WEALTH. "403 

for labour be considerable, they will be comparatively 
rich in the midst of deamess. 

To state these facts is not to favour taxes ; but to 
give one of the strongest reasons against them ; namely, 
that they are not only a great evil on their first impo- 
sition, but that the attempt to get rid of them after- 
wards, is often attended with fresh suffering. Thev 
are like those injudicious regulations of the mercan- 
tile system noticed by Adam Smith, which, though 
acknowledged to be pernicious, cannot be removed 
without producing a greater evil for an interval of 
considerable length. 

Theoretical writers are too apt, in their calculations, 
to overlook these intervals ; but eight or ten years, 
recurring not unfrequently, are serious spaces in human 
ute. i hey amount to a serious sum of happiness or 
misery, according as they are prosperous or adverse, 
and leave the country in a very different state at their 
termination. In prosperous times the mercantile 
classes often realize fortunes, which go far towards 
securing them against the future; but unfortunately 
the working classes, though they share in the general 
prosperity, do not share so largely as in the general 
adversity. 1 hey may suffer the greatest distress in a 
period of low wages, but cannot be adequately com- 
pensated by a period of high wages. Td^hem fluc- 
tuations must always bring more evil than good : and, 
with a view to the happiness of the great mass of 
society, it should be our object, as far as possible, to 
maintain peace, and an equable expenditure. 



^ 



it 



SUMMARY 



OF THE CONTENTS OF THE FOREGOING WORK, 



INTRODUCTION. 



?«*•• 



i 



The science of political economy resembles more the sci- 
ences of morals and politics than the science of mathema- 
tics 

This conclusion, founded on a view of the subjects about 
which political economy is conversant, is further strength- 
ened by the differences of opinion which have prevailed 
among those who have directed a great portion of their 
attention to this study . . 2 

The Economists and Adam Smith differed on some important 
questions in political economy, though they agreed on 
others still more important . . . ib. 

Among the most distinguished modern writers, differences 
of opinion continue to prevail on questions of gi eat im- 
portance 3 

The correct determination of these questions is of great 
practical consequence j Do 

An agreement among the principal writers in Political 
Economy is very desirable with a view to the authority of 
the science in its practical application 4 

In the present state of the science, an endeavour to settle 
some important yet controverted points may be more use- 
ful than an attempt to frame a new and complete treatise ib. 

The principal cause of the differences of opinion among the 
scientific writers on political economy is a precipitate at- 
tempt to simplify and generalize . 5 

The desire to simplify has occasioned an unwillingness to 
acknowledge the operation of more causes than one in 
the production of effects observed ....... ib. 



406 SUMMARY. 

Page. 

The rule of Newton, which teaches us not to admit more 
causes of any phenomenon than are necessary to account 
for it, implies that those which are necessary must be ad- 
mitted 6 

The same tendency to simplify occasions the rejection of 
limitations and exceptions . . . ib. 

The necessity of limitations and exceptions illustrated in the 
doctrines laid down by Adam Smith respecting frugality 
and saving , 7 

The same necessity illustrated in the rules which relate to 
the division of land ib. 

The tendency to premature generalization among political 
economists occasions also an unwillingness to bring their 
theories to the test of experience 8 

The first business of philosophy is to account for things as 
they are 

A comprehensive attention to facts is necessary, both to pre- 
vent the multiplication of theories, and to confirm those 
which are just ib^ 

The science of political economy is essentially practical, and 
applicable to the common business of human life . . . ib. 

Some eminent political economists think that, though excep- 
tions may exist to the general rules of political economy, 
they need not be noticed 10 

But the most perfect sincerity, together with the greatest 
degree of accuracy attainable, are necessary to give that 
credit and circulation to general principles, which is so 
desirable 11 

Another class of persons seem to be satisfied with what has 
been already done in political economy, and shrink from 
further inquiries, if they do not immediately see the prac- 
tical results to which they lead 12 

Such a tendency, if indulged too far, strike -»t the root of 
all improvement in science ib. 

More of the propositions in political economy will bear the 
test of cut bono than those of any other department of 
human knowledge . 13 

Further inquiries, however difficult, should be pursued, 
bolh with a view to the improvement and completion of 
the science, and the practical advantages likely to result 
from them . ib. 

It is of great importance to draw a line, with tolerable preci- 
sion, between those cases where the expected results are 
certain, and those where they are uncertain . . . . ib. 

Practical statesmen, who have not leisure for the necessary 
inquiries, should not object, under the guidance of a 
sound discretion, to make use of the leisure of others . 14 



SUMMARY. 407 

The principle of non-interference, necessarily limited in ] 
practice— 1st, By some duties connected with political 
economy, which it is universally acknowledged belong to 
the sovereign . . . . . 14 

2dly, By the prevalence, in almost every country, of bad 
regulations, which require to be amended or removed . 15 

3dly, By the necessity of taxation ib. 

The propriety of interfering but little, does not supersede', 
in any degree, the use of the most extensive professional 
knowledge either in a statesman or a physician . . 16 

One of the specific objects of the present work is to fit the 
general rules of political economy for practice, by endea- 
vouring to consider all the causes which concur in the 
production of particular phenomena . • . ib. 

This mode of proceeding is exposed to a danger of an oppo- 
site kind to that which arises from a tendency to simpli- 
fication, a danger which Adam Smith has not alwavs 
avoided .... 17 

A just mean between the two extremes is the* point aimed 
at with a view of arriving at the truth . . ft 

With a great wish to avoid controversy it was impossible 
not to notice specifically and largely Mr. Ricardo's distin- 
guished work on the Principles of Political Economy and 
Taxation . . # * 

The questions which it discusses are so important that they 

should if possible, be settled . :l. 

• «io. 



CHAPTER I. 

ON THE DEFINITIONS OF WEALTH AND PRODUCTIVE LABOUR. 



20 



Sect. I.— On the Definitions of Wealth. 

A definition of wealth is desirable, though it may not be 
easy to give one not liable to some objection 

I he liberty of a writer to define his terms as he pleases,' 
provided he always uses them in the sense proposed, 
may be doubted, as an inquiry may be rendered futile by 
an inadequate or unusual definition . 2J 

The comparative merits of the systems of the Economists' 
and of Adam Smith, depend mainly upon their different 
definitions of wealth . •, 

The Economists have confined the term wealth within too 
narrow limits 

Lord Lauderdale and other writers have given definitions 



which extend it too far 



ib 
ib. 



40B SUMMARY. 

Page, 

The line which it seems most natural to draw is, that which 
separates ma'erial from immaterial objects . . 22 

Adam Smith's definition of wealth is not free from objec- 
tion, though confined to material products . . ib. 

The material objects which are necessary, useful, or agree- 
able to mankind, proposed as a definition of wealth . 23 

In the application ot this definition, a useful distinction may 
be made between a rich country and a rich people . ib. 



Sect. II. — Of Productive Labour, 

The question of productive labour is dependent upon the 
definition of wealth, both in the system of the Economists, 
and in that of Adam Smith . . . . 23 

The application of the term productive to the labour which is 
productive of wealth, however defined, is obviously useful 24 

Adam Smith's definition of productive labour has been 
thought by some to be too extended, and by others too 
confined ... . . ib. 

It would be difficult to proceed in our inquiries into the na- 
ture and causes of th.fi wealth of nations, without some 
classification of the different kinds of labour . . ib. 

Such a classification is necessary —1st. To explain the na- 
ture of capital, and its effect in increasing national wealth 25 

2dly, To explaiu the nature and operation of saving, as 
contradistinguished from spending . . ib. 

3dly, To explain the causes which render favourable the 
important balance of produce and consumption . . 27 

And generally, to explain the causes why one nation is 
thriving, while another is declining . . . ib. 

The increasing riches and prosperity of Europe since the 
feudal limes could hardly be explained, if mere personal 
services were considered as equally productive of wealth 
with the labours of merchants and manufacturers . ib. 

If some distinction be necessary between the different kinds 
of labour, the next inquiry is, what this distinction should 
be ? . • • • • . . 28 

The distinction adopted by the Economists would not enable 
us to explain those appearances in different countries, 
which, in common language, are allowed to proceed from 
different degrees of wealth . . . . 29 

The opposite opinion to that of the Economists has been al- 
ready discussed, in the endeavour to show that some dis- 
tinction in the different kirds of I abour is necessary • ib. 

A distinction between the different kinds of labour is the 
corner-stone of Adam Smith s work . . . ib. 



SUMMARY. 409 

Another sort of distinction, however, might be made, dif- 
ferent from that of Adam Smith, which would not invali- 
date his reasonings . . . . . 30 
All paid labour might be called productive of value ; but 
productive in different degrees, according as the value of 
their results might exceed the value paid . . ib. 
Upon this principle, the labours of agriculture would gene- 
rally be the most productive, the labours in manufactures 
the next, and mere personal services the least . . ib. 

This mode of considering the subject would establish a scale 
of productiveness, instead of dividing labour into two 
kinds . . . . . 31 

The unproductive labourers of Adam Smith would, upon 
this system, be placed in the lowest scale of productive- 
ness • • . . . 32 

The great objection to this system is, that it makes the pay- 
merit for labour, instead of the quantities of the product, 
the criterion of productiveness . . . ib. 

Yet if we once desert matter, we must adopt this criterion, 
or every human exertion to avoid pain and obtain plea- 
sure is productive labour . . . . 33 

And if we do adopt this criterion, the very same kind of 
labour will be productive, or not, according as it is paid 
for, or not . . . . ft. 

Unproductive labourers are of great importance in the pro- 
duction of wealth indirectly, as demanders, but they can- 
not, with propriety, be said to create the wealth which 
pays them . . . . . . 34 

Adam Smith's distinction, which draws the line between 
what is matter and what is not matter, is probably the 
most useful and the least objectionable . . * .35 

Susceptibility of accumulation is essential to our usual con- 
ceptions of wealth . . . . ib. 

Capability of definite valuation is necessary to enable us to 
estimate the amount of wealth obtained by any kind of 
labour. . . . . . 3g 

The labour realized upon material products is the only 
labour which is at once susceptible of accumulation and 
definite valuation . . . . . ib. 

The objection of M. Gamier, respecting musical instru- 
ments, and the tunes played upon them, answered . ib. 

Objections of M. Gamier, respecting the servants of gov- 
ernment, answered . . . . . 37 

Some unproductive labour is of much more use and import- 
ance than productive labour, but is incapable of being 
the subject of the gross calculations which relate to na- 
tional wealth . . . . 38 

Having confined the definition of wealth to material objects, 

52 



410 SUMMARY. 



CHAPTER II. 

OF THE NATURE AND MEASURES OF VALUE, 



Pag* 



productive labour is that labour which is productive of 
wealth, that is, so directly productive of it, as to be esti- 
mated in the value of the objects produced . .39 
The object of this discussion is not to make subtle distinc- 
tions, but to bespeak assent to a useful classification . ib. 



Sect. I. — Of the different Sorts of Value. 

Two sorts of value are generally admitted — value in use, 
and value in exchange . . . . . 46 

The term value is so rarely understood as meaning the 
mere utility of an object, that if this interpretation of it 
be retained, it should never be applied without the addi- 
tion — in use . . . . . . ib. 

Value in exchange is found upon the will and power to ex- 
change one commodity for another . . .41 

If nature had, in the first instance, made such a distribu- 
tion of commodities as now takes place previous to con- 
sumption, their exchangeable values could not have been 
known . . ... ib 

An exchange implies not only the power and will to give 
one article for another more wanted, but a reciprocal 
demand in the owner of the article wanted for the one 
proposed to be exchanged for it ib. 

When this reciprocal demand exists, the quantity of one 
commodity which is given for another, depends upon the 
relative estimation in which each is held, founded upon 
the desire to possess, and the difficulty or facility of pro- 
curing possession . ib. 

Owing to the difference of desires and powers, the bargains 
thus made were, in the first instance, very different from 
each other . . . • .42 

By degrees, a current value of all commodities in frequent 
use would be established, and each commodity would be 
in some degree both a representative and measure of 
value . . • • • . . ib. 

But the frequent want of reciprocal demand, except in 
large fairs, would throw great obstacles in the way of an 
average valuation of commodities • . .43 

To secure this reciprocal demand, every man would endea- 
vour to keep by him some commodity so generally in 



SUMMARY. 411 

Page 



43 



45 



request that it would rarely be refused in exchange for 
what he might want . . 

Cattle were used for this purpose among pastoral natio'ns, on 
account of the facility of keeping them, and of the frequent 
exchanges of which they must have been the subject 44 

It is necessary that the commodity adopted for the medium 
of exchange and measure of value should be in frequent 
use, and its value well known . :u 

Notwithstanding the peculiar aptitude* of the* precious met- 
als for a medium of exchange and measure of value, they 
had not been used for that purpose in Mexico when first 
discovered . ., 

In the old world, where the arts of smelting and' refining 
ores seem to have been known at a very remote period 
the appropriate qualities of the precious metals pointed 
them out in the earliest times as the commodity best 

wk 1 u ?! dlUm ° f exchan g e anc measure of value 
Y\ hen they had been adopted as a genera, measure of value, 
they would almost always be the : ,le named, and the 
quantity of the precious metals for which commodities 
would exchange, might properly be called their nominal 
value 

* • 

This nominal value has been sometimes designated' by the 
term price, which thus represents a more confined sense 
oi the term value 

The introduction of a measure of nominal and relative vail 
ue, was a step of the highest importance in the progress 
ot society . ap 

It is the nominal value of goods, or their prices only! which 
the merchant has occasion to consider j D 

But the precious metals completely fail as a measure of the 
exchangeable value of objects in different countries, or at 
dinerent periods . - h 

Nominal wages and incomes alone, without'further'informa'- 
tion will not enable us to judge whether they are good 
or bad J & 



ib. 



ib. 



47 



We want some estimate of a nature which may be called 
real value in exchange, implying the quantitv of the 
necessaries and conveniences of life which nominal wa- 
ges and incomes will enable us to command . ib 

COr K e f meaSU _ re of real v ^e in exchange, as thus des- 
cribed, though very desirable, is not attainable. All that 
can be hoped for is, an approximation to it . ib 

We are not justified, on this account, in giving a different 
definition of real value in exchange, so as to confound the 
important distinction between cost and value 48 

I here is no other meaning of value, in addition to value in 
use, but what relates to exchange . ft 



412 SUMMARY. 



-Page 



The distinction between real and nominal value in ex 
change, is absolutely necessary in comparing the wealth 
of two nations together, or in estimating the value of the 
precious metals in different places and times . . 48 

There are then three sorts of value ; — 1. Value in use, or 
the utility of an object. 2. Nominal value in exchange, 
or value in money. 3. Real value in exchange, or value 
in necessaries, conveniences and labour . . 49 

These disinctions are in the main those of Adam Smith, and 
belong to his system . . . . . ib. 



Sect. II. — Of Demand and Supply as they affect Exchangeable 

Value. 

The terms, demand and supply, though in constant use, are 
not applied with precision. It is necessary, therefore, 
on account of their? universal influence, to clear the 
ground on this part act/he subject before we proceed 
farther . p.- . . . .50 

Demand may be defined to be, the will combined with the 
power to purchase ; and supply, the production of com- 
modities combined with the intention to sell them There 
is no instance of a change of price, but what may be 
traced to some causes which affect the demand or supply 51 

It must be remembered, that prices are determined, not by 
the demand alone, or the supply alone, but by their 
relation to each other . . . . ib. 

In one sense of the terms, demand may be said to be always 
equal to supply, but it is not in this sense in which they 
determine prices ..... ib. 

The more of the will and pcwer to purchase exists, with 
regard to any particular commodity, the greater or more 
intense is the demand for it . . . . 52 

The prices of commodities depend upon the causes which 
call forth, or render unnecessary, a great or intense 
demand . . . . . . ib. 

An increase in the number of the purchasers of an article, 
or its diminished supply, will raise its price ; a diminu- 
tion in the number of purchasers, or its abundant supply, 
will lower its price . . . . 53 

The first class of causes calls forth a greater intensity of 
demand, the second a less . . . . ib. 

Whatever may be the state of the supply, compared with 
the wants of the purchasers, if they have not the power 
and will to make a more intense demand, the price cannot 
rise . . . . . . ib 



SUMMARY. 413 






Page 



If the cost of production be increased, those only can be 
supplied who will submit to a greater sacrifice to obtain 
what they want, and make a more intense demand. . 63 

If a commodity be abundant compared with the number of 
purchasers, the same intensity of demand or sacrifice 
becomes unnecessary . . . . . 54 

If the cost of production be diminished, a useless excess of 
supply will always be contingent upon the price not fall- 
ing proportionably . . . . i65 

Whenever an advance of price takes place, it is because 
such advance is necessary to the supply of the consu- 
mer ; and whenever a fall takes place, it is because it is 
necessary to prevent the supply from being greater than 
the consumption . , . . ib. 

In this discussion, no new meaning has been given to the 
terms, demand and supply. It is intended that they 
should be understood in the sense in which they have 
always hitherto been understood, when applied to market 
P rices 66 



Sect. Ill.—Of the Cost of Production as it affects Exchangca- 

Value. 

The system which determines prices by demand and sup- 
ply, is essentially different from the system which refers 
to the costs of production, though they touch each other 
in many points . ... . .57 

In all transactions of bargain and sale, there is obviously a 
principle which determines prices, quite independently 
of the costs of their production . . . , 58 

This is acknowledged with regard to all monopolized commo- 
dities ; and is strikingly true in reference to the market 
prices of raw products . . . . . ib. 

Of commodities which are the least variable, the cost of 
production will be found only to influence their prices as 
it is the necessary condition of their supply . . 59 

The principle of demand and supply determines what Adam 
Smith calls natural prices as well as market prices . ib. 

This is proved by attending to the immediate and specific 
cause which alters prices, upon an alteration in the costs 
of production . . . . . ib. 

The costs of production appear to be of no avail, but in sub- 
ordination to the dominant principle of supply and de- 

,, n ? and • • 

This position may be illustrated by the effects upon prices 
of all sorts of bounties ... 61 

The value given to Bank paper by limiting its quantity', 
shews that the cost of producing gold only influences its 
price as it influences its supply , . ib. 



60 



/ 



414 SUMMARY. 



Page 



The true way of viewing the costs of production, in their 
effects upou prices, is as the necessary conditions of the 
supply of the objects wanted . . . .62 

The first necessary condition of this supply is, the payment 
of the labour employed . . . . .63 

The second condition is the payment of the ordinary profits 
ofstock . . . . . . ib. 

The third condition is, that the price of the commodity 
should be such as to pay rent on all but the very worst 
lands in cultivation . . . . . 64 

The price which fulfils these conditions is the natural price 
of Adam Smith, which it might be better to call necessary 
price, as susceptible of a more simple definition . . 66 

The natural or necessary price of a commodity is the price 
necessary to bring it regularly to market . . ib. 

Natural and necessary prices are determined by demand and 
supply, as well as market prices . . . ib: 



Sect. IV. — Of the Labour which has been employed on a Com- 
modity considered as a Measure of its Exchangeable Value. 

Adam Smith, in proposing labour as a measure of value, 
has not applied it always in the same sense . . 67 

Labour, applied in the sense of the quantity of labour em- 
ployed in the production of a commodity, is radically 
defective as a measure of exchangeable value . . 68 

In this sense it cannot be applied positively, because, if all 
commodities were at the same time to require more 
labour in their production, their exchangeable values 
would remain the same . . . . ib 

Understood relatively, it is not true that in the earliest stage 
of society " the proportion between the quantities of 
labour necessary for acquiring different objects is the 
only circumstance which can afford a rule for exchang- 
ing them" . . . . . ib. 

At a very early period of society, advances are necessary 
to some products, and the time during which these advan- 
ces are employed, forms a necessary element of price 
quite unconnected with labour . . .69 

It follows, that the rule which declares "that commodities 
never vary in value, unless more or less labour be em- 
ployed on them, cannot apply even in the early stages of 
society" . . . . . .72 

In improved countries, the same causes of variation, inde- 
pendently of the quantity of labour employed, must pre- 
vail, as in the early stages of society, with the addition of 
some others ib. 



SUMMAR\. 415 

Mr Ricardo's proposition, that the prices of some commo- **" 
dities fall when labour rises, is true, and it would not 
have appeared paradoxical if it had been stated more 
naturally 

1 he fall of price is occasioned by the fall of profits in those 

cZT fT the priCGS ° f Which had before ^^isted 
chiefly of the necessary remuneration for a large capital . 73 
Generally when labour rises and profits are loweredfsome 
commodities will rise, some will fall, and a very few re- 
main stationary, according to the varying proportions of 

iTbo 1 ^ aPP t0 SGt ^ m ° ti0n the Same «*«■% ^ 
The prices of all commodities on which the same 'quantity ^ 
oMabour has been employed, vary when the price of 

rnJm^ r T eS ' WlthaVer ^ SmalInumberofe ^ep^^ . 75 
In mproved countries, the importation of foreign commodi- 

ties, the prevalence of taxes, and the payment of rent, 

*^^£^. of prices > J *^«y * - 

The ^circumstance of the cost of the main food of a country ' " 
being resolvable almost entirely into wages and profits 
doe S not prevent rent from forming a component part of 
the price of the great mass of commodities . 77 

Other products of land have more the character of a mono^ 
poly than the main food of the country, and their prices 
cannot be resolved into wages and profits 78 

All cattle pay a rent, and in proportion to their qualities 
nearly an equal rent . H •. 

It may be said that, though the price' of cattle is not'regu- 
lated directly by the quantity of labour and capital em- 
ployed in their production, yet that it is, indirectly, 
through a chain of dependences on the cost of producing 

But one of the links of this chain will not hold', as the 'rents! ™ 
both of arable and pasture land, may rise without a rise 
in the price of corn . 80 

Many other important commodities, 'besides animal' food,' 
will be affected as to their prices by a rise of rents, with- 
out a rise of corn or labour . . ; b 

We cannot then get rid of rent under the most lax interpo- 
lation of the term labour, and Adam Smith's component 
parts of price must be admitted . . 81 

If one term only were used, it would be better to refer to* 

capital, which generally pays both rent and labour ; but 

the three terms are preferable, as more correct, and con- 

veying more information ... 82 

But if we cannot get rid of rent on the mass of commodities,' 

it must greatly affect the amount of capital, and aggravate 



416 SUMMARY. 



Page 
82 



ib. 



all the variations of price occasioned by the variations in 
the quantity of capital, and the time during which it is 

employed . • • \ . • 

Under all the variations therefore occasioned by other 
causes, it cannot be the quantity of labour employed 
which determines the relative values of commodities at 
the same time and place . • • 

Still less can the relative quantity of labour employed be a 
measure of exchangeable value at different times and 

d] fices . • • * * 

The instance produced by Mr. Ricardo to shew the superi- 
ority of his measure of value over that most frequently 
referred to by Adam Smith, shews at once that the labour 
employed on a commodity is a most incomplete and 
unsatisfactory measure of its value in exchange 
Labour is the principal ingredient in the component parts ot 
price, but to consider it as the sole ingredient must lead to 
the greatest practical errors . "■-,-.'" 

It must be concluded then, that the quantity of labour em- 
ployed on a commodity is neither a correct measure ot 
its exchangeable value at the same time and place, nor at 
different times and places . • • • 



84 



85 



ib. 



Sect. V.— Of Money, when uniform in its Cost, considered as 

a Measure of value. 

If, to procure a given quantity of money, the same quantity 
of labour were always expended, it has been thought that 
such money might be proposed as a standard measure ot 

value . • • " .„ 

But as the money prices of commodities would still repre- 
sent their exchangeable values at the same place, it fol- 
lows, from what was said in the last section, that they 
would not represent the quantity of labour employed . 

upon them . • '.',*•' 

If the precious metals required for their production a cer- 
tain quantity of fixed and circulating capital, then, on a 
rise of labour and fall of profits, all commodities would 
rise or fall in money price, which were not produced by 
the same sort of capital employed for the same time m. 

If the precious metals were obtained by mere advances in 
the payment of labour for a year, on a rise of labour and 
fall of profits all commodities would rise or tall wnicn 
were not circumstanced in the same peculiar manner . 
If the precious metals were obtained by mere labour, with- 
out any advances beyond the food of a day, on a fall ot 
profits all commodities in which any capital had been 
employed would fall 



ib. 



88 



SUMMARY. 4i 7 



Page 



89 



ib. 



We cannot then infer, from the relative prices of commodi- 
ties, the relative quantities of labour which have been 
employed upon them . 88 

Other variations would arise, from the durability of the 
precious metals, and the difficulty with which they accom- 
modate themselves to a sudden diminution of demand - ib 
1 he use made of the precious metals in foreign commerce 

would occasion further variations 
On the supposition that the metals were produced only in 
particular countries, but always with the same quantity 
of labour and capital, their present distribution shews us 
how inadequate a measure of real value in exchange they 
would be in different countries ... 

The same commodity which would command only one days' 
labour in England might still command five or six days' 
labour in Bengal . . . . . 90 

l he different values of silver in Bengal and England is pro- 
bably not occasioned principally by the lateness of the 
discovery of the American mines, as the relation between 
gold and silver is now nearly the same as in Europe . 91 
Jn the different European countries the value of silver is 
very different, though not so much so as in India, com- 
pared with the principal states of Europe . . ib 
Theoretically it is obvious that the increased cost of produc- 
ing commodities cannot facilitate the purchase of the pre- 
cious metals ... 
Though they may be distributed among the commodities of 
the same country according to the costs of production, 
they cannot be so distributed in different countries ib 
No conceivable regularity in the production of the precious 
metals could possibly render the prices of commodities an 
accurate measure of the quantity of labour which had 
been employed upon them 
If, however, they were obtained in each country' by dayl 
labour only, without any capital, they would approach 
near to a measure of real value in exchange, because 
their value in labour would in this case be the same as 



92 



93 



their cost m labour ; but still the money prices of commo- 
dities would not measure the quantity of labour bestowed 

on thpm " 



on them 



ib. 



Sect. VI. —0/ the Labour which a Commodity will command 
considered as a Measure of real Value in Exchange. 

The labour which a commodity will command unites, more 
nearly than any one commodity, the qualities of a real 
an d nominal measure of exchangeable value 94 

53 



41$ SUMMARY* 



Eag? 



1st. In looking for a general measure of exchangeable value, 
we should naturally direct our attention to that object 
which is roost extensively the subject of exchange, and 
this is certainly labour . • • . 94 

2. The value of commodities in exchange for labour can 
alone express generally the degree in which they are 
suited to the wants of the society . . . ib, 

3. The efficiency of capital in the increase of wealth de- 
pends entirely upon the power of setting labour to work, 

or, in other words, of commanding labour . . 95 

Labour, understood in the sense proposed, is, like the pre- 
cious metals, an accurate measure of relative value at the 
same time and place . • • • .96 

All other commodities are subject to greater and more sud- 
den variations * > • • . . ib. 

While labour is thus almost an accurate measure of value at 
the same time and place,"it approaches the nearest of any 
one commodity to such a measure in different places, and 
at distant periods of time . - • . 9 * 

Adam Smith has taken corn as the best measure of labour, 
from century to century, which is the same as consider- 
ing labour as the best measure of the necessaries of life, 
at distant times and in different countries . . ib. 

The conveniences of life depend more upon labour than 
corn \ and, all other things being equal, the quantity of 
labour which a commodity will command will be in pro- 
portion to the quantity it has cost . . .98 

The labour which a commodity will command takes in all 
the circumstances which influence exchangeable value ; 
the labour which it has cost only one, although the most 
considerable one . • • . ' . • 

No commodity can be a good measure of real value in ex- 
change at different times and places, which is not a good 
measure of exchangeable value at the same time and 

QO 

place . . . • * . * * 

In the progress of improvement, when labour will command 

the greatest quantity of corn, it will generally command 

the smallest quantity of the conveniences of life, and vice 

versa . - • • " . V 

On the whole, it approaches the nearest of any one object 
to a measure of real value in exchange, but still, as labour 
is subject to variations from demand and supply, like all 
other things, it cannot be considered as a standard. . ib. 



Sect. VII. — Of a Meanbelween Corn and Labour considered as a 
Measure of real Value in Exchange. 

Two objects might in some cases be a better measure of 
real value in exchange than one alone, and yet be suffi- 
ciently manageable for practical application . . J 00 



SUMMARY. 41f? 

Pag*? 



A certain quantity of corn, of a given quality, has a definite 
value in use ; but its value in exchange, both nominal and 
real, is found to be subject to considerable variations, both 
trom year to year, and from century to century 100 

Labour, in the same manner, is found at different periods to 
command very different quantities of the firstnecessary of 
lire, corn , # ini 

Though neither of these two objects, taken singly', can be 
considered as a satisfactory measure of value, by com- 
bining the two we may approach to greater accuracy . 102 
When corn compared with labour, is dear, labour, com- 
pared with corn, must be cheap ; and if we take a mean 
between the two, we shall have a measure corrected by 
the contemporary variation of each in opposite directions ib. 
*or this purpose we must fix upon some specific quantity of 
corn, which, on a large average, is equivalent to a day's 
common labour, such as a peck of wheat, which would 
suit this country ; and any commodities which, at dif- 
ferent periods, will purchase the same number of days' 
labour, and of pecks of wheat, may be considered as of 
the same real value in exchange jk 

In comparing different countries? the average earnings of 
a day s labour in the prevailing food, whatever it may be 
must be substituted for a peck of wheat ; and the differ-' 
ences, m the money values of such commodities as are of 
the same real values in exchange thus estimated, will ex- 
press the different values of silver, in different periods 
and countries . . . . . 103 

No measure can take into account the effects of capital and 
skill ; and they may be neglected without much error 
when the mam object is value in exchange . j D 

Mr. Ricardo asks, why should corn, or labour, or the mass 
oi commodities, be preferred as a measure to coals or iron, 
all being liable to fluctuations ? But some one or more 
commodities must be taken to express exchangeable val- 
ue ; because they include every thing that can be given 
in exchange . b 

We must choose between an imperfect measure, and one 
which is fundamentally erroneous, such as a measure of 
cost «... 104 

Value, as used by Mr. Ricardo, must mean exchangeable 
value ; and the reasons are obvious for preferring corn 
or labour, or a mean between the two, as a measure of 
exchangeable value, to coals or iron, or any such commo- 



420 SUMMARY. 

CHAPTER HI. 

OF THE RENT OF LAND. 



Sect. I. — Of the Nature and Causes of Rent. 

Page 

Rent is that, portion of the value of the whole produce of 
land which remains after all the expenses of cultivation 
have been paid, including the usual agricultural profits . 106 

The first object of inquiry is the cause or causes of this 
excess • . . . . . « id. 

Most writers have considered rent as too nearly resembling, 
in its nature and the laws by which it is governed, that 
excess of price above the cost of production, which is the 
characteristic of a common monopoly . . ib. 

Rent has some affinity to a natural monopoly ; but it is 
still essentially different, and is governed by different laws 109 

Three causes combine to from rent : — 1. The fertility of 
the soil ; — 2. The power of food to create its own demand ; 
— and 3. The comparative scarcity of fertile land . .110 

The first of these causes is so necessary to rent that, with- 
out it, no excess of price above the expenses of cultivation 
could possibly exist . , . . ib. 

The power of land to yield rent is exactly proportioned to 
its fertility, though the actual rent may be very different 111 

Still the surplus, which is the result of this power, might 
remain of little use without the tendency of food to create 
its own demand . . . . .. . ib. 

The machine which produces the necessaries of life is dif- 
ferent from every other machine known to man, and the 
use of it is attended with peculiar effects . .112 

A family which has land that will produce necessaries for 
five other families, may be sure to have effective demand- 
ers for them ; but if the same family had a machine 
which would make fifty hats or coats, no efforts could 
secure their being all wanted . . . ib. 

These peculiar qualities of the soil, and of its products, have 
been strongly noticed by the Economists, and often by 
Adam Smith, as a source of rent ; but modern writers 
have been apt to consider it as regulated upon the princi- 
ples of a common monopoly, though the distinction is im- 
portant and striking . . . . 113 

Jf the fertility of the mines were to be diminished one half, 
they might still yield the same rents, wages, and profits ; 
but if the fertility of the soil in this country were to be 
diminished one half, tillage would be nearly destroyed. 



SUMMARY. 42l 

and rents, profits, wages, and population, would be reduc- ^ 
ced in proportion . . , t jj^ 

The produce of certain vineyards in France might rise to 
almost any value from external demand ; but no external 
demand can ever make a bushel of corn permanently worth 
more than the quantity of labour which it will support .115 

In the production of necessaries, the demand being depend- 
ent on the production itself, it is impossible that the de- 
manders should increase, while the quantity of produce 
diminishes . . . . ib 

In common monopolies the excess of price above the cost of 
production, has no definite limit ; in the production of 
necessaries it is strictly limited by the fertility of the soil 116 

The price of necessaries cannot then be regulated upon 
the principles of a common monopoly . . 117 

Rent is evidently a part of that general surplus from the iand* 
without which none could exist but the mere cultivator ib. 



Sect U-—Of the necessary Separation of the Rent of Land front 
the Profits of the Farmer and the Wages of the Labourer. 

In the early periods of society the surplus produce is divid- 
ed chiefly between profits and wages, and appears but lit- 
tle in the shape of rent . . . jjg 

When, by the increase of capital and population, profits 
and wages have fallen, and land of an inferior quality has 
been cultivated, the value of food will be in excess above 
the costs of production on the most fertile lands, and rent 
will be separated .... ib 

A comparative scarcity of fertile land, occasioned by the in- 
crease of population, is necessary, in addition to the two 
causes before-mentioned, to separate a portion of the sur- 
plus produce into the specific form of rent . no 

A portion of the rents of the landlord must consist of a 
transfer from profits and wages, but this transfer is the 
necessary condition of increasing cultivation and re- 
sources . . . # # 1<?0 

Cultivators of the richer land, who pay no" rent after profits 
and wages have fallen and poorer land is cultivated, are 
proprietors as well as farmers • . . ib 

As profits and wages fall, poorer and poorer land will suc- 
cessively be taken into cultivation, and at every step rents 
will rise . t 121 

In the progressive cultivation and population of a free state! 
the progressive separation of rents, as a kind of fixture 
upon lands of a certain quality, is a law as invariable as 
the principle of gravity 



il 



422 SUMMARY. 



Page 



When tbe sovereign is owner of the soil the regularity of 
this progress is interrupted, and rents are prematurely 
created and increased . . . . . 122 

On fertile soils a high rent may be created immediately by 
taking a large portion of the gross produce ; but in this 
case only the most fertile lands can be cultivated, and 
profits, wages, and population, will come to a premature 
stop . . • • • . . id. 

To a certain extent this has been done in many eastern 
states, and it is the reason why their population has ceased 
to be progressive, although much good land remains 
waste. In these states, the almost entire dependence of 
rent on fertility is particularly conspicuous . .123 

The premature fall of profits and wages in such states can- 
not be prevented by the employment of capital and labour 
in other branches of industry besides agriculture . ib. 

In such states the interest of money is a most imperfect 
criterion of the general rate of profits, particularly on the 
land . . . . • . , 124 

Similar causes prevailed, though not to the same extent, in 
the early periods of most European states, and the rate 
of profits on the land had not much connection either 
with the profits of stock in manufactures and commerce, 
or with the interest of money . . . .125 

Under all circumstances, rent separates from the general 
surplus produce whenever a scarcity of fertile land takes 
place, either naturally or artificially . . .126 



Sect. III.— Of the Causes which tenet to raise Rents in the ordi- 
nary Progress of Society. 

Four causes may be stated as mainly tending to diminish 
the expenses of production compared with the price of 
produce and so to raise rents . . . .126 

The two first, profits and wages, are sometimes affected in 
opposite directions, and counterbalance each other, but 
this is only a temporary effect. In general, profits and 
real wages fall together, and this may take place by a pro- 
gressive money rise of corn and labour, as described by 
Mr. Ricardo . . . . . 127 

But profits and real wages may fall, and rent be regularly 
separated, under any variations in the value of money . ib. 

The third cause which raises rents, by lowering the ex- 
penses of cultivation, is agricultural improvements . 12$ 

If the improvements be such as to diminish the costs of pro- 
duction, without increasing the quantity produced, the 



SUMMARY. 423 

price will remain the same, and the whole diminution of **** 
cost will go immediately to rent . . .128 

If the improvements be such as to increase the produce* 
the price will fall, but population will very soon in- 
crease, and in a short time poorer land will be cultivated 
without a rise of price, and rents will rise . .129 

The very great improvements in agriculture which have 
taken place in this country have gone almost wholly to 
the increase of rents and the payment of taxes . . ib. 
Local improvements in agriculture go immediately, on the 
renewal of leases, to the landlords, and occasion, in par- 
ticular districts, a very great rise of rents, without any 
diminution of the ordinary rates of profits and wages . 130 
u ty i° P roductl °n in necessaries is never attended, as in 
all other commodities, with a permanent fall of price, and 
therefore it always increases rent . . Hv 

l he fourth cause which tends to rise rents is, such an in- 
crease m the value of agricultural produce as will increase 
tne difference between the price of this produce and the 
costs of production . . . .. ib. 

The rise in the price of corn occasioned by increased labour 
employed upon it is, after a certain period, confined with- 
in very narrow limits . . , m 131 
A rise in the money price of corn, occasioned' by demand* 
and terminating in a fall in the value of money, encour- 
ages cultivation and increases rents, without necessarily 
lowering wages and profits . . ib- 
The state of money prices, in the United States of America*, 

Jtends strongly to illustrate this position . . ib 

Effects of a similar kind, occasioned by a great demand for 
corn and high money prices, took place in our own coun- 
try from 1793 to the end of 1813, and rents rose without 
a fall of profits . ,. 3g 

A similar effect would be produced by a great and increas- 
ing demand for manufactures ; or great improvements in 
machinery, accompanied by a sufficient vent for the pro- 
duce . . . m . . 133 
When the stimulus to agriculture originates in a prosperous 
state of commerce and manufactures, labour sometimes 
rises first ; but this is not necessary . . .134 
When the price of corn rises, it is scarcely possible that 
all the materials of capital should rise at the same time, 
or even finally in the same proportion . . " 135 
A fall in the value of money can scarcely fail permanently 
to increase the power of cultivating poor lands, and of 
raising rents . . . . . . ib 

It is not necessary that all the four causes which tend to rise 
rents, by diminishing the relative costs of production, 



424 SUMMARY. 

Page 
should operate at the same time, in order to produce a 
rise . • • • • . . 136 

In this country cultivation has been extended and rents have 
risen, although one of the instruments of production — 
capital, has been dearer, or profits have been high . ib. 

Improvements in agriculture might raise rents, notwith- 
standing a rise of wages . . . . ib. 

No fresh land can be taken into cultivation till rents t»ave 
risen, or would allow of a rise, on what is already culti- 
vated . . . . . . . ib. 

No new capital can be employed on old land, at an inferior 
profit, without the same tendency to a rise of rents . 137 

The rise of rents will not be in proportion to the extension 
of cultivation, or the increase of produce . . . 138 

Rents in this country bear a less proportion to the whole 
produce now than formerly, although they are both nomi- 
nally and really much increased . . . ib. 

A progressive rise of rents is necessarily connected with 
accumulation of capital, increase of population, improve- 
ments in agriculture, and the high price of raw produce 139 



Sect. IV. — Of the Causes which tend to lower Rents. 

Rents are lowered by diminished capital, diminished popu- 
lation, a bad system of^cultivation , and the low price of 
raw produce . • • • • 140 

The three first are such obvious causes of low rents, that 
the fourth only need be considered . . ib. 

The effect of the fourth cause may be illustrated by the 
land thrown out of cultivation, and the fall of rents in this 
country at the end of the war . . . ib. 

When the produce of a country is declining, and rents are 
falling, it is not necessary that all the instruments of pro- 
duction should be dearer . .... 142 

When land is thrown out of cultivation, the diminished 
amount of rent will bear larger portion to the capital and 
produce . . . • • . ib. 

If, under the impression that rent is injurious to the consu- 
mer, the price of com were kept down so as to yield no 
rent, all except the very best land would be thrown out 
of cultivation . . . ... 143 



Sect. V. — On the Dependance of the Actual Quantity of Produce 
obtained from the Land upon the existing Rents, and the existing 
Prices. 

The price of corn, in every progressive country, will be 
equal to the cost of production on land of the poorest 



SUMMARY. 425 

Page 

quality actually in use, with the addition of the rent 
it would yield in its natural state . . . 143 

Corn, therefore, in reference to the whole quantity raised, 
is sold at its natural and necessary price, as well a9 all 
other unmonopolized commodities . . , 144 

The soil consists of a great number of machines in grada- 
tion, of very different original qualities and powers, 
though all susceptible of improvement . . . ib. 

In manufactures, as the most improved machines may be 
supplied in the quantity wanted, the use of inferior ones 
is superseded, and the price of the commodity falls to 
the cost of production from the improved machinery . 143 
In agriculture, the rich lands are never sufficient to supply 
the population ; and when poor lands are employed, the 
price compared with the cost of production must be such 
as to yield rents on all the richer lands, in proportion to 
their goodness . . , . . . ib. 

The illustration here used, of a gradation of machines, for 
producing corn, shews at once the necessity of the actual 
price to the actual produce, in the existing state of most 
countries ; and the different effects which would attend a 
reduction in the price of a manufacture, and a reduction 
in the price of corn .... 146 

We must not infer, however, that this gradation of soils is 
strictly necessary to the formation and rise of rent ; all 
that is required is, limited territory, combined with fer- 
tility and demand . fa 
H all the lands of a limited territory were equally rich, rents, 
after a certain time, would be high in proportion to the 
fertility of the soil . . , jt> # 
Nor would the effect be different if the quantity of capital 
laid out upon the same land could not be increased ; capi- 
tals would increase in other employments, and profits 
f'* 11 • . . . . . H7 
In these cases, rent is obviously not regulated by the grada- 
tions of the soil, or the different returns of the same 
amount of capital employed on the same soil . . ib. 
Another incorrect inference which has been drawn from 
this theory of rent is, that when land is thrown out of cul- 
tivation, profits will be high in proportion to the fertility 
of the soil then employed . . . . ib. 
As in an improved country, uncultivated land yields a rent 
in proportion to its power of feeding cattle or growing 
wood, the whole produce of the last land in cultivation, 
under such circumstances, could not be divided between 
profits and wages . . y . . . i 48 

The probable fall in the money price of corn, greater than 
in the materials of the farmer's capital, will tend further 

54 



426 SUMMARY. 

Page 

to diminish profits ; and often more than counterbalance 
the difference of natural fertility . . . 148 

The returns of the last capital employed on the same land, 
without paying a rent, must always follow and can never 
lead or regulate profits . . . .14? 

When land is thrown out of cultivation by the importation 
of foreign corn, capital will probably be redundant ; and, 
in that case, whatever may be the state of the last land in 
cultivation, profits must be low . . . ib, 

The rents paid for land in its natural state will not invali- 
date the doctrine, that, in progressive countries, with 
gradations of soil, corn is sold at its natural or necessary 
price . . . . . ib. 



Sect. VI. — Of the Connection between great comparative Wealth 
and a high comparative Price of Raw Produce. 

Adam Smith, in explaining the causes of the rise of many 
sorts of raw products compared with corn, has omitted to 
consider the causes of the differences in the value of corn 
at different times, and in different countries . .150 

The two main causes of these differences are, a difference 
in the value of the precious metals, and a difference in 
the cost of producing corn . . • .151 

To the first cause is to be attributed the main differences 
in the prices of corn in different countries, particularly in 
those situated at a great distance from each other . ib. 

If the value of money were the same in all countries, then 
the differences of price would arise exclusively from the 
different costs of production, under all the actual circum- 
stances of each country . . . .152 

Nations richer than others must, under similar circumstan- 
ces, either have their corn at a higher price, or be depen- 
dant upon their neighbours for their support . . 153 

High price, or the importation of necessaries, are the natu- 
ral alternatives belonging to a great increase of wealth, 
though liable to various modifications from circumstances ib. 

Corn has a natural tendency to rise in the progress of 
society, from the increasing cost of production, and manu- 
factures have a constant tendency to fall from an op- 
posite cause . . . . .154 

Whichever of the two causes of the high price of corn we 
consider, this high price is generally connected with 
wealth, contrary to the statement of Adam Smith . 155 



Sect. VII. — Of the Causes which may mislead the Landlord in 
letting his Lands, to the injury of both himself and the Country. 

The landlord, under all the circumstances of his situation, 
may naturally expect to raise his rents on the renewal of 



157 
ib. 



• SUMMARY. 42 7 

judicial 10 himself and the country I kr 

> ate t nl ghiSla l < ' St0th f beSt bidder ' without ^ ****** 
r e of nnV / H* m,S,akmS a temp ° rar y for a Permanent 
farms P ' f PreV€nt ' he in >P r ovemeot of his 

In the progress of prices, even when' likely to "be perma^ 
If T\ 'T ?" gbl alK ^ s ,0 be a ""le behind P 

,hir I S .r eret ° Sivethe whole °f their rents 'to 
their tenants, there is no reason to think that corn won d 
be more plentif.il or cheaper 

But when a proper spirit of industry and enterprize per- 
vads among a tenantry, i, is of "importance^ they 
should hare the means of accumulation and improvement ib 

Irregularit,es in the currency are another source o error 
to the landlord. When they continue long he most raise 
his rents accordingly, and lower them afain when the 
value of money is restored S , ,-„ 

With these cautions the landlord may fairly look to a per- 
manent increase of rents, and if in a country, the esti- 
vation of which is extending, they do not rise more than 

'to KT ■ t0 the price of co ™> jt ~ -* "• «S . 

Th taxe S s h fl|l iS on thl r r',, S ^ ted bi ' the Economists,' that ali '^ 
taxes fall „„ the landlords ; yet it is true that they have 

little power of relieving themselves . . ib 

SE Zesrif~^,? n T!! U! J tri f "'? ™ c ? ssar y Connection of the In- 

T ts dosT el" 16 'r, l0rd ?t c o™°'"» by Adam Smith 

seems M y h»R d Tu th ,° Se of the state ' a °° this 
seems to be confirmed by the theory of rent as laid 

down in the present chapter . * ' * ' a ' d , Rn 

But Mr. Ricardo considers these interests as directl'y opposl 
ed to each other. To this opinion he has been leTbv 

en, P as C a 'u' ^ T^f V™ Whicb he has tak <° * 
of prodS ' fr ° m high PriCe a " d difficU 'V . 

If h» hi l V |iT T5 COrreCt ' the P ini °os above' stated might * 
be well founded ; but if the landlord's income is practi- 
caUy found to depend chiefly upon facility of production 
the opm.on cannot be maintained P oouction, 

It js allowed that if a most extraordinary degree of' fertility 
were suddenly to take place in a country the rents nf 
land would for a time be lowered *' ° f 



161 
ib. 



428 SUMMARY. 

Fager 

But it is of no use to dwell upon extravagant suppositions ; 
what we want to know is, whether, in the existing and 
probable state of things, the interests of the landlord and 
of society are at variance . . . .161 

No improvements in agriculture which we have ever seen 
or heard of equal in any degree the power of population 
to increase up to the additional means of subsistence . 162 
Practically, improvements in agriculture, by cheapening the 
instruments of production, instead of throwing land out 
of cultivation, generally cause more to be cultivated . ib. 
Improvements in agriculture have hitherto been, and may 
be expected in future to be, the main source of the in- 
crease of rents . . . • . ib. 
Although rents rise when cultivation is pushed to poorer 
lands, the connection between rent and fertility is still 
shewn bv its being the rich lands which yields the rents, 
not the poor ones . . . . . ib. 
The difficulty of production on the best land used has little 
connection with rent, except as it is a consequence of an 
increase of capital and population, and of a fall of pro- 
fits and wages . . . • .163 
The increase of rent, which takes place from the increas- 
ed price, occasioned by difficulty of production, is much 
more limited than has been supposed ; and very much 
inferior to the increase from improvements in agriculture, ib. 
This position may be illustrated by the state of England, 

Scotland, Ireland, Poland, India, and South America. . 164 
In all these countries the future increase of rents will de- 
pend mainly upon an improved system of agriculture . ib. 
The United States of America seem to be the only country 
which would admit of any considerable rise of rents by a 
mere transfer from profits and wages . .165 

In old states, an operose and ignorant system of cultiva- 
tion may keep the profits of stock and the wages of la- 
bour low with much good land remaining uncultivated ; 
and this seems to be a very frequent case . • ib. 

But if, independently of importation, every thing which 
tends to enrich a country increases rents, and every 
thing which tends to impoverish it, diminishes them ; it 
must be allowed that the interests of the landlord and 
of the state are closely united . . .165 

Mr. Ricardo takes only one simple view of rent, which em- 
braces but a small part of the subject . .166 
The peculiar language of Mr. Ricardo separates his con- 
clusions still further from the truth, in appearance, than 
in reality * • . ib. 
He estimates rents, wages, and profits, by the proportions 
which they severally bear to the whole, and not by the 
actual quantity of produce which goes to each . ib« 



SUMMARY. 429 

This mode of estimating rents and wages is quite unusual, 
and would lead to perpetual confusion and error . 167 

Into this unusual language Mr. Ricardo has been betrayed 
by confounding value and cost, and considering corn in 
the same light as manufactures . . . .168 

The exchangeable value of the corn which falls to the share 
of the landlord will increase with its quantity ; and rents 
and wages must always be practically estimated by their 
real value in exchange . . . jgo. 

In speaking of the interests of the landlord, his real com- 
mand of wealth, or the real value in exchange of his 
rents, is always referred to in this work . . ib. 



Sect. IX.-— Ow the Connection of the Interests of the Landlord 
and of the Statc^ in Countries which import Corn. 

The only doubt respecting the strictest union of interests 
between the landlord and the state relates to importa- 
tion ; and here his interests cannot be more opposed to 
those of the state, than the interests of others under si- 
milar circumstances . . . # j^q 

Adam Smith was of opinion that the landlords were not in- 
jured by foreign competition, though he allowed that ma- 
nufacturers were .... j D 

The statement of Adam Smith is too strong ; but it is cer- 
tainly true that the producers of corn and cattle are less 
injured by foreign competition than the producers of 
particular manufactures . . . . ib. 

On the question of importation it is important to remark 
that, in the way in which capital is practically employed 
upon the land, the interests of the state and the cultiva- 
tor are not proportioned to each other . 171 

The cultivation of the country is chiefly carried on by te- 
nants, and a large part of the permanent improvements 
in agriculture, of late years, has been effected by the 
capitals of the same class of people . . j D# 

If this be true, the advantage derived by the country from 
the employment of such capitals must have been much 
greater than the advantage derived by the individuals em- 
ploying them . . . , #n2 

To put a tenant for a term of years on a footing with mer- 
chants and manufacturers, he must make greater yearly 
profits to compensate for tha* portion of his capital 
which he cannot withdraw at the end of his lease, and 
which is left as a benefit to the state unshared by him . ib. 
The profits to the state of a capital employed in agriculture 
might be 14 or 15 per cent, in commerce 12 ; while in 
both cases the individuals received only 12 . . 173 



• 



430 SUMMARY. 



Page 



The rent and profits together, derived from a capital em- 
ployed on land, are the true measure of the wealth which 
goes to the country, though the rent so created cannot 
have operated as a motive to the tenant . .175 

By the difficulties thrown in the way of importing foreign 
corn during the war, the capital of the country may have 
been directed into a channel of higher national, though 
not higher individual profits . . .174 

This must always be the case, when the demand for domes- 
tic corn is such that the profits of cultivation, joined to 
the rents created, exceed the profits of commerce and 
manufactures . . . . . . ib. 

The rapid increase of population, as well as of wealth, dur- 
ing the period of the difficulties of importation, seems to 
confirm the supposition that the great quantity of capital 
which went to the land was productively employed .175 

The position here laid down is limited, and depends upon 
permanent improvements being made by capitalists who 
have only a temporary interest in the results . ib. 

Under all the circumstances, it may be safely asserted that 
the interest of no other class is so nearly connected with 
the interests of the state as that of the landlord . .176 



Sect. X. — General Remarks on the surplus Produce of the Land. 

It is extraordinary that the very great benefit which society 
derives from that surplus produce of the land which forms 
-rent, should not yet be fully understood and acknow- 
ledged . . . . . . 176 

It has been called a bountiful gift of Providence ; but Mr. 
Ricardo considers it in a very different light — passage 
quoted . . . . . .177 

In referring to the value of any gift, we should speak of it 
in relation to the laws and constitution of our nature, and 
of the world in which we live ; and there could not be a 
more disastrous present to man than an unlimited power 
of producing food in a limited space . . 178 

But if both land and food must in the nature of things be lim- 
ited, the value of the land which man receives must de- 
pend upon the number it will support, compared with 
the number required to work it, or, in other words, on 
the surplus produce . . . . ib. 

If manufactures, by gradation^ in machinery, were to yield 
a rent, man would, as JVIr. Ricardo says, labour more ; 
but the surplus produce of the land, which is the founda- 
tion of rent, is a measure of his relief from labour 1 . 179 



179 
180 
ib. 
181 

182 



SUMMARY. 
Mr ' R i? ar f ' ? ho § ener!)1| y looks to permanent and final '"* 

>«ta k ^=ri' t »^ 

PiS^r^' W0, " d «!«**»* rents tK™ ".' 
f radically there is reason to believe that, as a chanee from 

corn to rice must be gradual, not even a temporary fen 
of rent would take place "'porary tall 

, \ I ms l e n oVth e . CUltiV f ti0n ° f the P '°' atoe has bee " a* ™ain 

Tz^^rtzr popu,a,ion and of rents 

In comparing countries, under similar circumstances with 
respect to extent and quantity of capital emS 7ent 

5*£££ ^ f^ ****** <° 8*3 «* 
If this island had been doubly fertile, it would probably ai 

this time have been doubly rich and populous, and the rent. 

more than double what they are at present, and "he rev"' 
B,,7?h h ^. happenecl ^i' had been only half as fertile ih 

But though high rents and fertility generally go together' 

they cannot bear a similar proportion to ealh other Tn 

S°oXAme 9 r ica fferent,y *"£»"" - *££*"£ 
The fertility of the land, either natural o'r acquit is the ' b ' 
only source of permanently high returns for capital be! 
cause the high profits of commerce and manufactures mu! 
necessarily be destroyed by competition . ' ,„, 

fend • ih- ,nC0 T deriV6d fr ° m the ca P itals lai d out upon* 
land in this country was above three times as great as that 
derived from commerce and manufactures f lfl 

The prosperity of a fertile territory does not, like that of a 
manufactumng state, depend upon low wases and wh I- 
prudential habits among the pV, in a country m"i„v 
dependmg on manufactures, might ruin it ; they would i^ 
an agricultural state, be the greatest blessing^ ' , 8 , 

iand° h f W adVaDtage ° f the SUr P' us Produce from the 
land that, Under a system of private property, it afibrdsa 
security against the whole of the sorietj ? being employed 
in procuring necessaries * ° em P l0 J e(1 

Profits and wages may so diminish 'as to afford comp^ativelv 
few means of enjoyment ; but rents will always fncrease 

SSffffl: tr> sciences - and —-.srs 

Rents are attached to the soil, not to particular proprietors ' * 
they are the reward of present, as well as of p^ler- 
numbes ^ J mcrea9e wi " b e divided among greater 



432 SUMMARY. 

Pag« 

The importance of the surplus produce which terminates in 
rent, can only be underrated by those who labour under 
some mistake as to its nature and its effects on society 186 



CHAPTER IV. 

OF THE WAGES OF LABOUR. 



Sect. 1. — On the Dependance of the Wages of Labour upon Supply 

and Demand. 

The wages of labour are the remuneration to the labourer 
for his personal services, and may be distinguished into 
nominal and real . • . • .187 

Nominal wages are the money earned by the labourer. 
Real wages are the necessaries and conveniences which 
that money will command . . . . lb. 

Wages are determined by the demand and supply of labour, 
compared with the demand and supply of what is paid 
for labour . . • . . lb. 

The principle of demand and supply determines the wages of 
labour, not only temporarily but permanently . .188 

The prices of the necessaries of life only affect wages as 
they affect the supply of labour, by affecting the cost of 
producing it . . . . . . lb. 

In all cases, where the cost of production does not affect 
the supply of labour, wages are not affected . . ib. 

Adam Smith's position, that the money price of labour is 
regulated by the demand for labour, and the price of 
necessaries, is practically quite true ; but it is of impor- 
tance to keep constantly in view the mode in which the 
price of necessaries affects the price of labour . .189 

In all the cases of different prices of labour in different em- 
ployments, which Adam Smith has illustrated, the effect 
obviously depends upon causes which affect the supply of 
labour . . . • .... 190 

Adam Smith has, in general, referred to the principle of sup- 
ply and demand, in cases of this kind, but he has occasion- 
ally forgot it . • • • • .191 



Sect. II.— Of the Causes which principally affect the Habits of 

the labouring Classes. 

Mr. Kko*»4f' f definition of the natural price of labour im- 
plies an uua*«al and unnatural state of things . .192 



SUMMARY. 433 

The natural or necessary price of labour is that price which, ^ 
in the actual circumstances of the society, is necessary for 
the required supply . . m .193 

The condition of the labouring classes depends partly upon 
the rate at which the resources of the country are in- 
creasing, and partly upon the habits of the people . ib 

Both these causes are subject to change, and often change 

together . . . m . . ib. 

Still, however, habits are different with the same increase 
of resources ; and an inferior mode of living is a cause as 
well as a consequence of poverty . . 194 

It would be desirable, though difficult, to ascertain theprinl 
ciple causes of the different modes of subsistance which 
prevail among the poor of different countries . . ib. 

From high wages two results may arise— either a rapid in- 
crease of population, or a decided improvement in the 
mode of living . . . # . . 195 

Whatever tends to depress the character of the poor, con- 
tributes to the first of these results ; whatever tends to 
elevate them, to the second • . . ib 

The most efficient causes of depression are, despotism, op- 
pression and ignorance ; the most efficient causes of ele- 
vation are, civil and political liberty and education . ib 
Of the causes which tend to generate prudential habits, the 
most essential is civil liberty ; and to the maintenance of 
civil liberty, political liberty is generally necessary . ib. 
Education may prevail under a despotism, and be deficient 
under a free constitution ; but it can do little under a 
bad government, though much under a good one . 196 

Ireland is an instance where increasing produce has occa- 
sioned a rapid increase of population, without improving 
the condition of the people . . . 7 ib 

England, in the first half of the last century,* is an instance 
of high wages leading to an improved mode of living, 
without a rapid increase of population . .197 

The change from bread of an inferior quality to" the best 
wheaten bread was probably aided by a change in the 
relative values of wheat, oats and barley, occasioned by 
adventitious circumstances 
When wheaten bread had become customary in some dis- 
tricts it would spread into others, even at the expense of 
comforts of a different description . . .199 



198 



55 



434 SUMMARY. 



Sect. III.— Of the Causes which principally influence the Demand 
for Labour, and the increase of the Population. 

Page 

A fall in the value of produce, compared with the price of 
labour, will not always occasion a proportionate increase 
of population ..... 200 

This disagreement between apparent wages and the pro- 
gress of population will be further aggravated in those 
countries where poor laws prevail . . . 201 

The actual application of a greater quantity of food of some 
kind or other, to the maintenance of labouring families, 
is necessary to an increase of population ; and may ge- 
nerally be traced ..... 20£ 

The increase of population in America, Ireland, England 
and Scotland, of late years, may be traced to this cause, ib. 

What is mainly necessary to a rapid increase of population 
is, a great demand for labour, which demand is propor- 
tioned, not to an increase of capital alone, but of capital 
and revenue together. .... 203 

It has been thought that it is circulating capital alone which 
influences the demand for labour, not fixed ; but this dis- 
tinction, though just in individual instances, is not neces- 
sary in reference to the value of the whole produce . ib. 

In general, the use of fixed capital is extremely favourable 
to the abundance of circulating capital. This is shewn 
in almost all our manufactures . . . 204 

On the use of fixed capital in agriculture mainly depends 
the cultivation of barren soils . . . 205 

When however fixed capital increases so rapidly, compared 
with the demand for commodities, as to lower the value of 
the whole produce, a want of employment, and tempora- 
ry distress will be felt among the labouring classes . 208 

The exchangeable value of the produce of a country de- 
pends partly upon price, and partly upon quantity . ib. 

It is from the union of the two, in the most favourable pro- 
portions that, under the existing physical resources of a 
country, the increase of wealth and the demand for la- 
bour are a maximum .... 207 



Sect. IV. — On the Effect of a Fall in the Value of Money upon 
the Demand for Labour, and the Condition of the Labourer, 

The unfavourable effects of a fall in the value of money on 
the condition of the labourer, are not so certain as have 
been supposed ..... 207 



SUMMARY. 435 

The fall in the real wages of labour, from the end of the ^ 
15th to the end of the 16th century, contemporary with 
the fall in the value of money, is proved from authentic 
documents . . . . . # 207 

But the question is, which wages were the most extraordi- 
nary, the high or the low . 209 

During the reign of Edward III. the real wages of labour 
seem to have been as low as in the reign of Elizabeth . 210 

In the intermediate period, they varied considerably with 
the varying prices of corn and labour; but from 1444 
they were uniformly very high to the end of the century 212 

The very slight rise in the nominal price of grain, from 
the middle of the 14th to the end of the 15th century, 
in no respect made up for the diminished quantity of 
silver in the coin, so that the bullion price of corn fell 
considerably . , 213 

But the bullion price of labour rose considerably during 
the time that the bullion price of corn fell ; and if Adam 
Smith had taken either [labour or a mean between corn 
and labour as his measure, instead of corn, his conclu- 
sions respecting the value of silver would have been very 
different . . . m < . ib 

But to shew that the wages of labour were peculiar during 
the last sixty years of the 15th century, it is necessary 
further to compare them with periods after the depre- 
ciation of money had ceased . . . . 214 

The earnings of the labourer, during the last sixty years 
of the 17th century, after the depreciation of money 
had ceased, were lower than in the reigns of Elizabeth 
and Edward III t l \ )t 

From 1720 to 1750 the price of corn fell and the wages of 
labour rose, but still they could command but little more 
than the half of what was earned in the 15th century . 217 

From this period corn began to rise, and labour not to rise 
quite in proportion ; but during the forty years from 1770 
to 1810 and 11, the wages of labour in the command of 
corn seem to have been nearly stationary . . ib. 



Sect. V.— On the Conclusions to be drawn from the preceding 
Review of the Prices of Corn and Labour during the Five last 
Centuries. 



f 



From this review it appears, that the great fall of labour in 
the 16th century must have been occasioned more by the 
unusual elevation it had before attained, than by the dis- 
covery of the American mines ; and that the high wages 
of the 15th century could only have been occasioned bv 



I 



43C SUMMARY. 

Pag* 

some temporary causes, which increased the relative 
supply of corn compared with labour . . 21& 

Such high wages, whatever might have been their causes, 
must have fallen during the next century, if the Ameri- 
can mines had not been discovered . . . 220 

There is reason to think that a rise in the price of corn, 
occasioned merely by a fall in the value of money, would 
not injure the labouring classes for more than a few 
years . . . . ib. 

Another inference which we may draw from this review is, 
that, during the last 500 years, the corn wages of labour 
in England have been more frequently under than above 
a peck of wheat . . . . . . ib, 

A third inference is, that the seasons have a very great in- 
fluence on the prices of corn, and the real wages of la- 
bour, not only for two or three years occasionally, but 
for fifteen or twenty years together . . . 221 

The periods of the lowest wages have generally occurred 
when a rise in the price of corn has taken place under 
circumstances not favourable to a rise in the price of 
labour ; it was the rapid increase of population during 
the reigns of Henry VIII and Elizabeth, which prevent- 
ed wa^es from rising with the price of corn . . 222 

If the discovery of the American mines had found the peo- 
ple earning less than a peck of wheat instead of half a 
bushel, the increase of resources, during the 16th cen- 
tury, would have raised the corn price of labour, not- 
withstanding the increasing money price of corn . 223 

If the price of labour from 1793 to 1814 bad not been kept 
down by artificial means, it would have risen quite in 
proportion to the price of corn . . . ib* 

In estimating corn wages it has not been possible to make a 
distinction between a fall of corn and a rise of labour, 
although they have a different effect on the demand for 
labour, and the increase of population. . . 224 

Wheat has been taken, as the usual grain consumed in this 
country, but wherever or whenever that is not the case, 
wheat wages are not the proper criterion of the encour- 
agement given to population .... 225 

The quantity of the customary food which a labouring fami- 
ly can actually earn throughout the year, is at once the 
measure of the encouragement to population, and of 
the condition of the labourer . . . 226 

The prudential habits of the poor can alone give them the 
command over a fair proportion of the necessaries and 
conveniences of life, from the earliest stage of society to 
the latest. . . . ib. 



SUMMARY. - 437 

Mr. Ricardo's measure of the value of labour relates rather ^ 
to the rate of profits than the condition of the labourer 
and will be considered in the next chapter . [ 226 



CHAPTER V. 

OF THE PROFITS OF CAPITAL. 



228 
ib. 



Sec*. I.— Of Profits as affected by the increasing Difficulty of 
procuring the Means of Subsistence. 

Capital ought, properly speaking, to be distinguished from 

stock. Definition of each 
Profits are the difference between the value of the ad- 
vances necessary to produce a commodity, and the value 
ot the commodity when produced 
The rate of profits is the proportion which this difference 
bears to the value of the advances, and it varies with 
all the causes which alter the proportions between the 
values of the advances and of the produce . 229 

The main advances necessary to production consist of la- 
bour ; and the two chief causes which influence the i 
expense of labour are the difficulty of procuring food : 
and the quantity given to each labourer . ft, 

Each of these causes is alone sufficient to occasion all the- 

variations of which profits are susceptible . ib 

If the first cause operated alone, and the wages of labour' 
were always the same, profits would regularly fall as 
poorer land was taken into cultivation . " 230 

In this case, profits would be nearly in proportion to the 

fertility of the last land taken into cultivation . ib 

tfut uniform corn wages during the regular progress of cul- 
tivation and population involve a contradiction 231 
We may suppose, however, an uninterrupted progress of 
capita and population ; and then, as poorer land was cul- 
tivated, less and less must be divided between labour 
and profits . ., 

If the labourer could diminish his physical wants in propor- 
tion to the difficulty of production, the rate of profits 
might remain the same ; but as he cannot, labour will 
mu°t fill F pr ° i30rtion of the Produce, and profits 

Profits and real wages would be highest at first, ano\ would 
gradually diminish together, till they both came to a stand 
at the same time 



232 



43S SUMMARY. 



Pagt 



Profits in manufactures and commerce would also fall, owing 
to the high value of corn and labour compared with other 
commodities, and the consequent increased expence of 
producing these commodities, compared with their value 
when produced . 233 

In this progress, the rate of profits is limited by the powers 
of the last land taken into cultivation ; but limitation is 
essentially different from regulation . . . 234 



Sect. II.— O/" Profits as affected by the Proportion which Capital 

bears to Labour. 

The second main cause which, by increasing the amount of 
the advances, influences profits in the proportion which 
capital bears to labour ...» 234 

When capital is really abundant compared with labour, pro- 
fits must be low, and no facility of production can occasion 
high profits, unless capital is scarce . . • 235 

If, while the capital of a country continued increasing, its 
population were checked by some miraculous influence, 
every sort of gradation might take place in the rate of 
profits, from this cause alone . • . . lb. 

Profits would be high at first, and would be gradually dimi- 
nished, as capital continued to increase faster than labour, 
till the motive to accumulation ceased . . . lb. 

Profits, in the case supposed, would be affected in the same 
' way as at present, but rents and wages very differently 236 

Rents and profits would be low, because the supply both 
of land and of capital would be abundant, and the wages of 
labour would be high because labour would be scarce ; 
and thus the value of each would be determined by the 
principle of supply and demand . • . lb. 

If the land of a country were supposed to be all of the same 
quality, and all fertile, but limited in quantity, profits and 
corn wages would finally be low, and rents very high . 237 

The effects which would result from these suppositions shew 
that the successive cultivation of poorer land is not neces- 
sary either to low profits or high rent . ■ . ib. 

The effects of the former of the two suppositions on wages, 
shew the prodigious power which the labouring classes 
possess, if they chuse to exercise it, of securing to them- 
selves a large share of what they produce . . » b - 

In the progress of wealth, capital and population do not 
keep pace with each other, and their different rates of 
increase at different times occasion great temporary va- 
riations in the rate of profits . • « 

Though the government long annuities are tending constantly 
to a diminution of value, yet, from an abundance of capi- 



239 

ib. 

240 



SUMMARY. 43g 

U P°;' h r esam ? Principle, we should fall into great practil "*" 
cal errors, if we were to estimate the rate of profits with 

thf .To C „ e re°r ,y '° ,he ^^ ° { ^ 0C ^ ** ^ 

Y %L^%rZr ]oDe * atMr - *«**•«»• '« * 

If the premises were such as Mr. Ric'ardo supposes, his con-' 
clus.ons would be just ; but as other powerful causes are 
'"operation besides those which he" has contemned 
his conclusion must contradict experience f ' ib 

not^ T. d u Pend ' 3S Stated ^ Mr - R ^«do, on the 
Sourer reqU,red '° Pr ° Vide the neCeS3aries * 

If by the necessaries of the labourer be meant what Mr" ' b 
Ricardo calls the natural wages of labour, the proposition 
s untrue ; because profits must obviously be affected by 
{he' Z y oZr mtU!/ * WeU aS "*" ° f neces ^ries paid to 

If by necessaries be m'eant the'actual e'aruings 'of the labour! "' 
er^ the proposition is essentially incomplete, as it quite 
omits the causes of high or low corn wages q : h 

In determining the quantity of food awarded to the labourer* 
the principle of demand and supply and competifinn 
brought forward by Adam Smithed rejected C Mr 
Ricardo, must be referred to y 

There is no other cause of permanently high'profits than a 
deficiency in the supply of capital ? F ° a 

d?ff»5 e , renCeS 1 D the / ate of P rofits ' occasioned by the 
different proportions of capital to labour, in such countries 
as Poland and America, hardly form any part of Mr 
Ricardo's theory of profits F 

'\h?fairo e f a nL t fi ° t UDd '; rrat t th t im p' orta '»:«'»f that cause of 
the fall of profits, which has been almost exclusively con- 
sidered by Mr. Ricardo. It is of such a nature as LX 
to overwhelm every other . a " y 

slow" and t^ P ° Wer be S ° great ' i,; P'W '* very 
slow, and other causes are producing effects which entire- 

ly overcome it for a considerable length of time ib . 



242 
ib. 

ib. 



Sect. III.-O/ Profits as affected by the Causes practically in 

operation. 

In the actual state of things, the two causes already noticed 

others '" CODJUnctlon > and wi " be ft rther modified by 



440 SUMMARY. 

Bage 

If, at the same time that poorer land is successively cultivat- 
ed, agricultural improvements are taking place, the in- 
fluence of the latter cause in raising profits may more 
than counterbalance that of the former in lowering them 244 

The same effect in checking the natural tendency to a fall of 
profits will be produced by an increase of personal exer- 
tions among the labouring classes . . . ib. 

The two circumstances just noticed tend to diminish the 
expense of production ; but profits vary also with prices, 
as well as costs . • • • ^45 

A considerable effect on profits therefore may be occasion- 
ed by a rise in the price of corn, without a proportionate 
rise in the costs of production . . . ib. 

These three circumstances have all a tendency to counter- 
act the effects of cultivating poorer land ; and it is not 
easy to say to what extentyhey may balance or overcome 
them . . ... 246 

The reason why agricultural profits are chiefly dwelt upon 
is, that the whole stress of the question depends upon 
them . . • • ... ib. 

But fully allowing the final operation of that cause of the 
fall of profits, which depends upon the state of the land, 
yet from its slow progress, and the counteraction of other 
causes, ample play is left for the principle of competition ib. 

This mav be illustrated by facts which have occurred in 

i 947 

our own country • • • • • ^' 

In the early part of the last century, the interest of money, 
and the profits of stock, were much lower than at the 
beginning of the present, notwithstanding great quantities 
of "fresh land had been taken into cultivation in the in- 
terval . . • • ... id. 

The different rates of interest and profits at these two peri- 
ods are diametrically opposed to the theory of profits 
founded on the natural quality of the last land taken into 
cultivation . . • • • *^9 

The circumstances under which these facts took place shew 
that they were connected with redundancy or deficiency 
of capital ; and the question is, whether this principle 
could operate so freely as to overcome the effect of tak- 
ing poorer land into cultivation - 249 

In the first period, apparently a period of redundant capi- 
tal, corn fell, and wages rather rose, which would ac- 
count at once for low profits of stock . : ib. 

In the second period, a period when capital was in great 
demand, all those causes seemed to be in operation 
which tend to counteract the effects of taking poorer 
land into cultivation . . • • 25 ° 

The increased rate of agricultural profits from 1793 to 1813 
arose more from the increased amount of agricultural pro- 



SUMMARY. 44 j 

duce, obtained by the same number of families, than ^ 
from a diminution of corn wages . q 50 

■Though some of the causes noticed were in part "acciden- 
tal, yet m contemplating a future period, we may lav our 
account to their operation, in a considerable degree 
when the occasion calls for them ' q 52 

I he profits of stock will probably be higher at the begin- 
ning of the 20th century than during the next twenty 
years, if the more distant asra should be a period of war 
with a great demand for capital, and the nearer one 
a period of peace with a redundant capital . ' 253 

in dwelling exclusively upon the relative abundance and ' 
competition of capital, as the cause of falling profits, 
Adam Smith is practically nearer the truth, than those 
who dwell almost exclusively on the quality of the last 
land taken into cultivation 



ib. 



Sect. IV.— Remarks on Mr. Ricardo's Tlieory of Profits. 

Mr Ricardo's Theory of Profits depends upon the position, 
that wages and profits always form together the same 
value, under any variations of money wages : but this 
position being unfounded, the money wages of labour 
cannot regulate the rate of profits . 254 

I his conclusion will appear still more strikingly true if 
we suppose the precious metals to be obtained by a uni- 
iorra quantity of labour unassisted by capital, in which 
case they would retain more constantly the same value 
than in any other . h 

On this supposition, all the same effects on profits which 
l r n V'f ard ? as J ribes to the rise of money wages 
would take place from a fall in the money prices of com- 
modities and a small rise in the price of corn ib 
I he principle of demand and supply would determine the 
degree in which prices would fall ; and these prices 
compared with the uniform price of labour, would regu- 
late the rate of profits . 5 265 
Mr. Ricardo never contemplates the fall of prices as oc- 
casioning the fall of profits, although in many cases it 
will be the main cause of such fall, and will obviously 
be occasioned by competition . J ib 
r,pon the principle of competition, there is reason to think 
thatthe profits of stock in this country would not be 
Higher it the price of corn were greatly reduced by im- 
portation . , . 256 
Permanent improvements in agriculture afford the largest 
arena for the employment of capital without a diminu- 
Won of profit , . ^ 

56 



* 



442 SUMMARY. 

Eage 

A very extensive territory with the soil of a poor quality, 
yet nearly all capable of cultivation, might, by continu- 
ed improvements in agriculture, employ a vast mass of 
capital for hundreds of years with little fall of profits . 258 

A small fertile territory, though it should freely import 
corn, might have its profits greatly reduced before it had 
employed one third of the capital which had been laid 
out in the former case . • • . ib. 

The fall of profits in a country which imported a consider- 
able part of its corn would probably be occasioned, not 
by a rise in the bullion price of corn, but by a fall in 
the bullion price of the goods with which it was pur- 
chased • . . . • 259 

In the largest article of our exports — cottons, the fall in 
the wages of labour, which ought to have been accom- 
panied by high profits, according to this theory of pro- 
fits, has, in fact, been attended with falling profits . ib. 

If it be said that the cotton trade is confessedly glutted, it 
may be asked whether any considerable trade can be 
pointed out where high profits call for additional capi- 
tal 259 

It must be allowed then, that, in looking to the causes of 
the fall of profits, we take a view of but one half of the 
question if we consider only the rise of wages and not 
the fall of commodities . . . 260 

On every supposition, however, the great limiting princi- 
ple, which depends upon the increasing difficulty of pro- 
curing subsistence, is always ready to act, and must final- 
ly lower profits ; but even this principle acts according 
to the laws of supply and demand . . . ib. 

The reason why profits must fall as the land becomes more 
exhausted is, that the effective demand for necessaries 
cannot possibly increase in proportion to the increased ex- 
pense of producing them . . . . ib. 

The further demand for corn must cease when the last 
land taken into cultivation will but just replace the capi- 
tal and support the population engaged in cultivating it . ib. 

But what would be the effect on profits of any particular 
amount of accumulation could not be predicted before- 
hand, as it must always depend upon the principles of de- 
mand and supply . . . .261 



SUMMARY. 443 

CHAPTER VI. 

OF THE DISTINCTION BETWEEN WEALTH AND VALUE. 



A country possessing the greatest abundance of commodi- 
tities without labour might be rich without exchangeable 

va ! ue • • • . . .262 

But in the real state in which man is placed on earth,' 
wealth and exchangeable value are more nearly connect- 
ed than they have sometimes been supposed to be . ib. 

When more commodities of the same quality are obtain- 
ed by improved machinery at the same cost, the distinc- 
tion between wealth and value is obvious ; yet even here 
the possessor of the increased quantity is only richer 
with a view to consumption, not to exchange . . 263 

In comparing objects of different kinds, there is no other 
way of estimating the degree of wealth which they con- 
fer, than by the relative estimation in which they are 
held, evinced by their relative exchangeable values . 263 

Wealth, however, does not always increase in proportion 
to increase of value ; but neither does it increase in pro- 
portion to the mere quantity of commodities, if they are 
not suited to the wants of the society . . 264 

Wealth depends partly upon the quantity of produce, and 
partly upon such adaptation of it to the wants and pow- 
ers of the society as to give it the greatest value . ib. 

But where wealth and value are the most nearly connect- 
ed, is, in the necessity of the latter to the production of 
the former ; 263 

It is the value of commodities, or the sacrifice which peo- 
ple are willing to make in order to obtain them, that, in 
the actual state of things, may be said to be the sole 
cause of the existence of wealth in any quantity . . ib. 

The market prices of commodities are the immediate 
causes of all the great movements of society in the pro- 
duction of wealth, and these market prices express their 
exchangeable values ..... 266 

The term value, or value in exchange, is always understood 
here in the enlarged sense explained in Chap. II., and 
never in the more confined sense used by Mr. Ricardo . ib. 



444 SUMMARY. 

CHAPTER VII. 

ON THE IMMEDIATE CAUSES OF THE PROGRESS OF WEALTH. 



Sect. I. -^Statement of the particular Object of Inquiry. 



Page 



ib, 



The particular object of inquiry is to trace the causes which 
are roost effective in calling forth the powers of pro- 
duction in different countries . ... 268 

Moral and political causes are, in this respect, of primary 
importance ; but it is intended chiefly to consider those 
which are more directly within the province of political 
economy . . 

Many countries, with great powers of production, are poor, 
and many, with scanty powers of production, are compa- 
ratively rich, without any very essential difference in the 
security of property ..... 269 

If the actual wealth of a country be not, after a certain pe- 
riod, in some degree proportioned to its powers of pro- 
duction, there must have been a want of stimulus to 
produce ; and the practical question for consideration is, 
what is the most immediate and effective stimulus to the 
progress of wealth ... . 26U 



Sect. II. — Of an Increase of Population considered as a Stimulus 
to the continued Increase of IVealih. 

If want alone, or the desire of the necessaries of life among 
the labouring classes, were a sufficient stimulus to pro- 
duction, the earth would have been comparatively full of 
inhabitants . . .... 270 

A man whose only possession is his labour can make no 
effectual demand for produce if his labour be not wanted ib* 

To justify the employment of capital, there must be a de- 
mand for the produce of it, beyond that which may be 
created by the demand of the workmen employed . 271 

The effect of the increase of population to raise profits by 
lowering wages must be very limited, and must soon be 
checked by want of demand . . . . ib. 

By a reference to experience, it will be found that those 
states often make the slowest progress in wealth where 
the stimulus arising from population alone is the greatest 272 

The practical question is, whether the pressure of the 
population hard against the limits of subsistence is an ade- 
quate stimulus to the increase of wealth ? And the state 
of most countries of the world determines the question in 
the negative . . . • . , ih. 



SUMMARY. 445 

Sect. III.— Qf Accumulation, or the Saving from Revenue to 
add to Capital, considered as a Stimulus to the Increase of 
Wealth. J 

Those who reject mere population as an adequate stimulus 
to the increase of wealth make every thing depend upon 
accumulation ; and there is certainly no other mode of 
increasing capital than the saving from revenue to add 

toit • .. • / . 273 

But we have to inquire what it is that disposes nations to 
accumulate, and renders accumulation effective to the con- 
tinued increase of wealth . . . . ib. 

The saving from revenue to add to capital may increase 
produce faster than the demand for it ... 274 

It ha3 been thought by some able writers that a glut of com- 
modities cannot be general ; but this doctrine seems to 
be unfounded • • • . • ib. 

As a matter of fact, it is not true that commodities are 
always exchanged for commodities. The great mass of 
commodities is exchanged for labour, and may fall in 
value compared with such labour . . . ib. 

A geueral fall in the value of commodities compared with 
labour, so as to lower profits almost to nothing, is pre- 
cisely what is meant bj' a general glut . . . 275 

M. Say, Mr. Mill, and Mr, Ricardo appear to have fallen 
into some fundamental errors in the view they have taken 
of this subject . . . . . ib. 

1st They have considered commodities in relation only to 
each other, and not in relation to the wants of the con- 
sumers .... ib 

If commodities were only to be compared with commodi- 
ties, their doctrine would be true ; but compared with 
the wants of the consumers, they may fall so as to check 
both the power and will to accumulate , . . ib. 

Effectual demand is not merely the offering of one commo- 
dity for another : they may both command no more la- 
bour than they have cost, in which case there would be no 
effectual demand for either of them , . . 276 

A new commodity thrown into the market, which yields 
high profits, is very different from a mere increase of 
quantity, and will certainly increase demand ; because it 
implies a better adaptation of the produce to the wants of 
the society . , . . . . ib. 

Mr. Ricardo acknowledges that there may be a temporary- 
glut of commodities when capital increases faster than 
labour ; but this is allowing that capital may be often 
redundant . . . *.. . 277 



146 SUMMARY. 



Page 



Another error on this subject is, the not considering the in- 
fluence of so important a principle in human nature as 
indolence, or the love of ease 

It has been supposed that if a body of farmers and a body of 
manufacturers produced each luxuries as well as neces- 
saries, there never could be any difficulty as to a market 
for them . . • • • • ! • 

But this is taking for granted that luxuries are preferred to 
indolence, and that the profits of each party are consu- 
med as revenue — the very points in dispute . . ib. 

A preference of indolence to luxuries, in either of the par- 
ties, would immediately occasion a want of demand ; and 
history informs us, that such a taste for luxuries as will 
properly stimulate industry is a plant of slow growth . 359 

The third, and most important error, consists in supposing 
that accumulation ensures effectual demand . 279 

Mr. Ricardo considers 10,000/. spent or saved, as equally 
demand, though for different objects . . . ib« 

On this principle it is thought that a general saving in con- 
veniences and luxuries would only lead to the production 
of a greater quantity of necessaries ; but this could not 
happen without a total change in the motives to accumula- 
tion . . • • • . . ib. 

The definition of fertile land is, land which will support a 
much greater number of persons than are necessary to 
cultivate it ; and if the landlord were to save this sur- 
plus, that is, employ it in setting more labourers to work 
on the land, he would impoverish instead of enrich himself 280 

When the cultivators found that they could not realize their 
surplus, they would cease to employ the same quantity of 
labour on the land ; and such parsimonious habits, by 
destroying the motive to cultivate well, would render 
a country, which had been rich and populous, compara- 
tively poor and unpeopled . . . ib. 

In the case of the body of farmers and manufacturers before 
supposed, all would go on well while they mutually con- 
sumed each other's products and luxuries ; but if they 
began to save for the future, a want of demand would be 
immediately felt . . . . .281 

If the cultivator were a tenant, the additional care and labour 
bestowed upon the land would be entirely thrown away ; 
if he were a landlord, he could not cultivate his land to 
the greatest advantage with regard to the future, without 
altering his habits or throwing away the surplus . . 282 

The body of manufacturers would be still less able to im- 
prove their condition by saving ; and it appears quite cer- 
tain that a passion for accumulation must lead to a supply 
of commodities beyond the demand for them . • 283 



285 



ib. 



SUMMARY. 44: 

It is a most important error therefore to couple the passion **** 
for expenditure and the passion for accumulation together 
as if they were equally calculated to ensure demand , 283 
In the division of the produce, labour might absorb the val- 
ue of a large proportion of manufactured commodities 
owing to their cheapness, although it might be ill paid in 
necessaries . . t m ofi* 

In agriculture, all the parts of the same produce might not 
be of the same value. The wages of the labourer cannot 
sink below a certain point, but a part of the supply of 
corn might lose the character of wealth . 

If the cultivator could only employ a diminished capital on 
his land at a tolerable rate of profits, and could find no use 
for the remainder, it would be the same to him as if pro- 
fits were generally lowered . . 286 
If all that was lost by the capitalist were gained 'by the 
labourer, the evil would be temporary, as stated by Mr. 
Kicardo ; but saving, pushed beyond a certain point, will 
destroy profits, and throw labourers out of employment 
at the same time . 

Parsimony and even a temporary diminution of consumption 
are often useful and necessary ; but no nation can W 
stbly grow rich by an accumulation of capital arising from 
a permanent diminution of consumption . ib 

The limits to such an accumulation of capital as shall not 
be attended with a rapid diminution of the motive to ac- 
cumulate may very easily be passed . 287 
The laws which regulate the rate of profits and the pro- 
gress of capital bear a striking resemblance to the laws 
which regulate the wages of labour and the progress of 
population . . . i b 
Mr. Ricardo has not been satisfied with shewing that the difl 
faculty of procuring the food of the labourer is the only 
absolutely necessary cause of the fall of profits : but he has 
gone on to say that there is no other cause that has any 
degree of permanence . . , . \b 
Population may be redundant compared with 'the demand 
tor it and the actual means of supporting it, although it 
may be greatly deficient compared with the extent and 
capabilities of the territory . . 288 
In the same manner, capital may be greatly deficient "com- 
pared with the territory and population, though redun- 
dant compared with the effectual demand for commodi- 
ties and the capital that is to produce them . ib 
lne first thing wanted in both these cases is a demand for 
commodities by those who are able and willing to pay an 
adequate price for them . F * 



289 



448 SUMMARY. 

Pag* 

The recovery of capital during a war is rapid, for the same 

reason that the recovery of population is rapid after it 

has been suddenly diminished 
In neither case would the same rate of increase have taken 

place without the previous diminution . • 290 

It is equally vain, with a view to a permanent increase of 

wealth, to push saving to excess, as to push population 

to excess . 



ib. 



292 



Sect. IV.— Of the Fertility of the Soil considered as a Stimulus 
to the continued Increase of Wealth. 

A fertile soil gives at once the greatest natural capability of 
wealth that a country can possess ; and m speaking ot 
the deficient wealth of a fertile country, it is meant to 
speak comparatively rather than positively . . ^91 

The settlers upon a very rich soil, with a vicious division 
of property at first, and unfavourably situated with re- 
gard to markets, might increase very slowly in wealth 
and population, and would be very likely to acquire indo- 
lent habits . • • ■" ' 
It is found by experience that those who have the command 
of labour do not always employ it so as adequately to ad- 
minister to their wants and wishes. The establishment 
of the finer manufactures has always been found to be a 
work of time and difficulty . •- . .< 
An individual workman has the power of devoting more 
time to luxuries, the less time he is obliged to employ in 
procuring food ; a whole nation possesses a similar pow- 
er, but it is practically very seldom exerted . . 
The conveniences and luxuries of life would be scanty, if 
the actual producers of them had no other motives than 
the desire of enjoying them : it is the want of necessa- 
ries which mainly stimulates the labouring classes to 
produce luxuries . • • • . * 
At an early period of cultivation, when only the richest 
soils are worked, it is generally found that the greatest 
proportion of the people is employed upon the land, 
which is just contrary to what would happen if it were 
true that, the more easily food is procured, the more 
time will be spent in the production of luxuries . 
In England, which has pushed its cultivation farther than 
most countries, a smaller proportion of the people is em- 
ployed on the land than in any large nation of Europe, 
or of the world . • • • . *. 
If facility of production prevents the growth of national 
industry, the more fertile land may become practically 
unproductive 



295 



ib. 



295 
ib. 



SUMMARY. 449 

Pace 

la the same manner, if the facility of procuring food cre- 
ates habits of indolence in the individual, he may prefer 
the luxury of working little to the luxury of possessing 
conveniences and comforts . ... 296 

The state of the Spanish dominions in America, as describ- 
^ ed by Humboldt, strongly illustrates these positions . ib. 

The produce of the banana, compared with the labour em- 
ployed upon it, is so prodigious, that the inhabitants of 
the districts where it prevails will never, it is said, be 
roused from their excessive indolence till the cultivation 
of it has been prohibited .... 297 

Though the labouring classes have such ample time to 
work for conveniences and comforts, they are almost 
destitute of them ; and from improvident habits, suffer at 
times even for want of food . . . ib. 

This poverty is not confined to the lower regions of New 
Spain, in ascending the Cordilleras to the finest climates 
in the world, the state of things is not very different . 298 
Maize, which is the chief food of the people on the Cor- 
dilleras, very greatly exceeds in productiveness the 
grains of Europe . . . . . ib. 

Even in Mexico subsistence may be obtained by one or two 
days' labour in the week, yet the people are wretched- 
ly poor . . . . . .299 

The same poverty prevails in the country districts ; and 
famines, from the failure of the crops of maize, com- 
bined with the indolence and improvidence of the peo- 
ple, are frequent, and are mentioned by Humboldt as 
the most destructive check to population . . 300 

kuch habits of indolence and improvidence necessarily 
act as formidable obstacles in the way of a rapid increase 
of wealth and population . . . . ik 

The indolence of the natives is aggravated by their political 
situation ; but still it yields to excitement and demand, 
as is proved by the rapid cultivation which takes place in 
the neighbourhood of new mines . . . ib. 

Except in the neighbourhood of the mines, and near great 
towns, the effective demand for produce is not such as to 
induce the great proprietors to bring their immense tracts 
of land under cultivation .... 301 

An Indian tenant, cultivating grain, would seldom be able 
to pay a rent equal to what the land would yield in pas- 
ture . . . . . . ib 

Though the landlords have ample power to support a large 
population on their estates, they have not the will, and 
under a deficiency of commerce and manufactures, Span- 
ish America might remain for ages poor and thinly peo« 
pled, compared with her natural resources • . 302 

57 



450 SUMMARY. 

Pag* 

The actual poverty of New Spain, compared with its pow- 
ers, is justly attributed by Humboldt to a want of con- 
sumers, that is, a want of effective demand . . 302 

That it is the want of demand rather than the want of capi- 
tal which retards the progress of wealth in New Spain, 
may be inferred from the abundance of capital noticed by 
Humboldt . . • • • • 304 

Altogether, the state of New Spain strongly illustrates 
the position, that fertility of soil alone is not an adequate 
stimulus to the increase of wealth . . . ib. 

A similar conclusion may be drawn from the state of Ire- 
land, where the introduction of the potatoe as the gene- 
ral food of the working classes renders the labour neces- 
sary to maintain a family unusually small . . 305 

Ireland maintains a larger population than is necessary for 
the quantity of work to be done, which naturally pro- 
duces habits of indolence ; and practically, those who 
have the command of necessaries and labour do not ob- 
tain what they want in return . . . ib. 

The time which the Irish labourer has to spare does not, 
as appears from experience, put him in possession of 
an ample quantity of conveniences and luxuries . 306 

The Irish peasant has not been exposed to the usual ex- 
citements which create industry, owing to the abundance 
of people compared with the work to be done . ib. 

If the labour of the Irish peasant, whether in the house 
or in the field, were always in demand, his habits might 
soon change . • • * 3\)-t 

Capital alone would not accomplish the object required, as 
in the actual state of the foreign and domestic markets, 
or in their probable state after the employment of such 
capital, there would not be an adequate demand for its 
products . • .... o0«? 

In general, the checks which Irish manufactures and pro- 
ductions have received, have been more owing to want 
of demand than want of capital. Demand has generally 
produced capital, though capital has sometimes failed to 
produce demand ..... 309 

Ireland might be much richer than England if her redun- 
dant population were employed in commerce and manu- 
factures ; but to accomplish this object, a change of ha- 
bits would be more effectual than a premature supply 
of capital . . • • • **10 

The state of Ireland leads to nearly the same conclusions 
respecting the causes which mainly influence the pro- 
gress of wealth as the state of New Spain . . »8 



SUMMARY. 451 

Sect. V. — Of Inventions to abridge Labour, considered as a Stimu- 
lus to the continued Increase of Wealth. 

Page 

Inventions to save manual labour are generally called forth 
by the wants of mankind in the progress of improvement ; 
and therefore seldom much exceed those wants • • 311 

But the same laws apply to machinery as to fertile land : a 
full use cannot be made of either without an adequate 
market • • • • • • • ib. 

The natural tendency of machinery is, by cheapening the 
commodity produced, so to tend the market for it, as to 
increase its whole value. This has been strikingly the 
case in the cotton trade ; and when machinery has this 
effect, its enriching power is prodigious • • ib. 

When capital and labour are thrown out of particular em- 
ployments by machinery, the advantage derived from it 
may still be great, but it depends upon a contingency • 31£ 

If, to try the principle we push it to a great extent, and sup- 
pose that, without any extension of the foreign market, 
we could obtain all the commodities at present in use 
with one third of the labour now applied, there is every 
reason to think that the exertions of industry would 
slacken ••.... 313 

When the incomes of a country greatly depend upon indus- 
try and exertion, there must be something desirable in the 
object to be attained, or the industry and exertion will 
not be called forth • . . • 314 

If, under a loss of foreign commerce, the efforts to supply 
tastes already formed could be supposed to maintain the 
wealth actually acquired, there is little chance of its in- 
creasing ; and it certainly would not have reached the 
same amount, without the market of foreign commerce • 315 

Of this we shall be convinced, if we look at the quantity of 
our exports occasioned by machinery, and the returns we 
receive for them. We could not have found effective 
substitutes for such returns at home • • • ib° 

*f, from the time of Edward I. we had had no foreign com- 
merce, our revenue from the land alone would not have 
approached to what it is at present, and still less our re- 
venue from trade and manufactures • • • 316 

Most of the states of Europe, with their actual divisions of 
landed property, would have been comparatively unpeo- 
pled, without the excitements arising from manufactures 
and extended markets • • • ib. 

The effects of our steam-engines, during the late war, would 
have been greatly diminished if we could not have ex- 
ported their products • • • '317 



452 SUMMARY. 

Page 

By the application of machinery to the mines of America, 
the King of Spain might obtain great wealth ; but the ad- . 
vantage would be comparatively nothing, if the products 
could not be exported for a market * * '317 

If, in this country, the products of our machinery could not 
be exported, there are no plausible grounds for saying 
that the capitals thrown out of employment would as ef- 
fectively increase the national revenue * * ib. 

A country has unquestionably the power of consuming all it 
produces, and it has also the power of applying much 
more labour than it actually applies to production ; but it 
does not follow that these powers will be put into activi- 
ty without the usual excitements • • • 318 

The presumption always is, that facility of production will 
open adequate markets ; but it must be allowed that, if 
it does not, its advantages are in a great degree lost 349 

Accumulation of capital, fertility of soil, and inventions to 
save labour, are the three causes most directly favoura- 
ble to production ; but as they ail act in the same direc- 
tion, and without reference to demand, they cannot afford 
an adequate stimulus to the continued increase of wealth ib. 



Sect. VI. — Of the Necessity of a Union of the Powers of Production 
with the Means of Distribution, in order to ensure a continued 
Increase of Wealth. 

To give effect to the powers of production, it is necessary 
that there should be such a distribution of the produce, 
and such an adaptation of it to the wants of those who are 
to consume it, as constantly to increase its exchangeable 
value • • • • • ' * 320 

The stimulus to the increase of particular commodities is 
an increase in their market prices ; and in the same way, 
the greatest stimulus to the increase of the whole produce 
of a country, is an increase of its value, from a better 
distribution of it, before more labour and capital have 
been employed ... • ib. 

If the produce of a country were so distributed as not to be 
suited to the wants and tastes of the consumers, it would 
greatly fall in value ; and if it were distributed so as to 
be better suited to their wants and tastes, it would rise in 
value • ' 321 

Upon the improvement of the communications with the me- 
tropolis in this country, by turnpike roads and canals, the 
whole value of the produce rose considerably, and en- 
couragement was given to the employment of a greater 
capital • ' ' ' * ' ib. 



ib. 



SUMMARY. 45S 

The exchangeable value of the whole produce of a country ^ 
may be measured for short periods by bullion • • 322 

For longer periods it may be measured by the labour, do- 
mestic and foreign, which the bullion price of the produce 
will command • 

General wealth, like particular portions of it, will alwavs 
follow effective demand. When the whole produce will 
command more labour, wealth will increase ; when it will 
command less, the progress of wealth will be checked • 323 

Mr. Ricardo states that a given quantity of necessaries will 
set in motion the same labour, whether they have been 
produced by the exertions of a hundred or two hundred 
men ; but this cannot be true, unless we suppose that the 
real wages of labour are every where, and at all times 
alike • • . . . . ' ., 

In the case of a diminished demand for produce, the capi- 
talist would soon lose both the will and the power to em- 
ploy the same quantity of labour as before • . 324 

An increase in the value of the produce estimated in labour 
seems to be absolutely necessary to an unchecked increase 
of wealth ; and to support this value, it is necessary that 
there should be such a distribution of the produce a<y*o 
effect a proper proportion between produce and consuW 
tion • • • . . . ^ 

If this value cannot be maintained under a rapid conversion 
of revenue into capital, how is that saving, which is ac- 
knowledged to be necessary, to take place without pro- 
ducing the diminution of value apprehended ? • . 325 

It may take place, and generally does take place, in conse- 
quence of a previous increase of revenue. It is this 
previous increase which gives the great stimulus to accu- 
mulation and makes it effective in the continued produc- 
tion of wealth • • • . • • "h 

M. Sismondi limits the value of the produce of any year to 
the value of the revenue of the preceding year ; but this 
would preclude increase of value. A great increase of 
exchangeable value and demand may take place in any 
one year by a better distribution of produce, and a better 
adaptation of it to the wants of the society • • ib 

The fortune of a country, like that of most merchants, is 
made by savings from increased gains, and not from a di- 
minished expenditure • gog 

To estimate the increasing wealth of a country by the in- 
creasing value of its gross produce, is not to exalt the 
gross produce at the expense of the neat ; because im- 
provements which increase the neat produce, generally 
increase at the same time the gross produce * . 327 



454 SUMMARY. 

Page 
No definition of wealth can be just that does not embrace 
the gross produce. Those who live on wages are the 
most numerous and important part of the society 327 

The interests of individual capitalists prompt them to save 
labour ; and both theory and experience tend to show 
that these efforts tend on the whole greatly to increase 
the exchangeable value of the whole produce • ' 329 

Production and distribution are the two great elements of 
wealth, which, combined in due proportions, are able to 
carry it to its utmost possible limits • ' ib. 



Sect. VII.— Of the Distribution occasioned by the Division of 
Landed Property considered as the means of increasing the Ex- 
changeable Value of the whole Produce. 

The three causes most favourable to distribution are, the 
division of landed property ; internal and external com- 
merce ; and the maintenance of unproductive consumers 330 
In the first settlement of new colonies, an easy subdivision 
of the land is necessary to give effect to the principle of 
popj^tion • ' • • ib. 

The rapid increase of the establishments in North America 
depended greatly upon the facility of settling new families 
on the land as they branched off from their parent 
stocks • * • * * ' 3 ^ 

The vicious distribution of landed property almost all over 
Europe, derived from the feudal times, was the main 
cause which impeded the progress of cultivators and wealth 
in the middle ages ■ • ' . ' lb * 

The difficulty was not so much to inspire the rich with a 
love of finery as to divide their immense properties, and 
create a greater number of demanders, which could only 
be effected very gradually * 3S2 

It is physically possible for a small number of very rich pro- 
prietors and capitalists to create a very large demand ; 
but practically, it has always been found that the exces- 
sive wealth of the few is never equivalent, in effective de« 
mand, to the more moderate wealth of the many 333 

But though it be true that the divisiou of landed property 
to a certain extent is favourable to the increase of wealth, 
is equally true that beyond a certain extent it is unfa- 
vourable ■ • ' . ' * lb ' 

It will be found that all the great results m political econo- 
my respecting wealth, depend upon proportions ; and this 
important truth is particularly obvious in the division ° f 
landed property 



SUMMARY. 45d 

Page 



On the effects of a great subdivision of property, an experi- 
ment is now making in France. The law of succession 
d.v.des property equally among all the children, and allows 
but a small portion of it to be disposed of by will . <m 

>uch a law would be of use in most countries of Europe for 
a time ; but if it continue to be the law of France, it will 
lead to great poverty as well as equality • . ih 

*>uch a state of property would be favourable neither to the 
maintenance of the present mixed government, nor to the 
continuance of a well constituted republic • . <*** 

But it would be a favourable soil for a military despotism. 
The army might easily be made the richest class in the 
country and it would then possess an influence which, in 
such a state of things, nothing could resfst • :u 

I n the British empire the immense landed possessions which 
formerly prevailed have been divided by the prosperity 
of commerce and manufactures . . l y . w 

A large body of middle classes has been formed from com- 
men*, manufactures, professions, &c. who are likely to 

V^ITT CUVe demaDder * th ™ small proprietors of land ib 
Under these circumstances, it might be rash ^conclude that 

he wp° *£"?** nght of P rim °g^iture would increase 
the wealth of the country ; but if we could come to this 
conclusion, it would not determine the policy of a change 338 

noThl 3 ^ 'V^ that the BHtish constitution could 
not be maintained without an aristocracy ; and an effective 
aristocracy could not be maintained without the rf-ht of 
primogeniture ... . ° . 

It is not easy to say to what extent the abolition of the law 
of primogeniture would divide the landed property of the 
country ; but the division would probably be unfavorable 
to good government • . . h 

Although therefore a more equal distribution of landed pro-' 
perty might be better than that which actually prevails, it 
might not be w lse to abolish the law of primogeniture 339 

true that the division of landed property is one of the 

fn^P ^r *'&**** which tends to keep up and 
increase the exchangeable value of the whole produce 340 

Sect VIII.— Of the Distribution occasioned by Commerce internal 

E ? r Z,! Xcha ??f which take? pl«ce in a country effects a dis- 
nbut.cn of ,ts commodities better adapted to the wants of 

tz^:^ to sWe a sLter ™*« - 1 - 

* * 341 



456 SUMMARY . 



Page 



The Economists insisted that commerce only equalized 
prices which were in some places too high, and in some 
too low ; but the effect of an advantageous exchange is to 
increase the amount of the value of both products 341 

If internal commerce did not tend to increase the value of the 
national produce, it would not be carried on ; as it is out 
of this increase that the merchants concerned are paid lb. 

If it be allowed that the industry of a country is determined 
by the extent of its capital, still the value of the revenue 
so derived must depend upon the way in which this capi- 
tal is employed ■ • • * 342 

The whole produce of a nation may be said to have a mar- 
ket price in money and labour. When this price rises, 
produce increases ; when it falls, the increase of produce 

is checked - * * ' ' * 343 

It is only by referring commodities to a circulating medium 
that we can ascertain whether they are so distributed as 
to command a greater quantity of domestic and foreign la- 

i m . . • IDs 

Fromthe harvest of 1815 to the harvest of 1816, the funds 
for the maintenance of labour were more plentiful than 
usual, yet, from defective distribution, they would not 
command so much labour as before . . - 344 

We have no right to assume that a great produce will always 
be effectively distributed and consumed. If the whole 
produce falls in money value, the distribution must be 
such as to lower profits and to discourage production . Mq 

Referring to labour as the final measure of the value of the 
whole produce, its bullion value should be previously re- 
ferred to, in order to ascertain whether its distribution be 
such as to enable it to command labour in some propor- 
tion to its quantity . • .",,'.. ', 

The distribution of commodities, occasioned by internal 
trade, is the first step towards any considerable increase 
of wealth and capital . • * 

The motives which lead to foreign commerce are the same 
as those which lead to an extension of the home trade-- 
naraely, an increase of profits, or the prevention ot that 
fall which would otherwise have taken place 

Mr. Ricardo says, that no extension of foreign commerce 
can immediately increase the amount of value in a coun- 
try ; but this is quite contrary to facts, according to the 
common meaning of the term used . • • 

A present from a foreign country, or the unusual gains ot a 
prosperous adventure, may enrich some merchants, with- 
out proportionately impoverishing others, and therefore 
mav increase the value of the whole 

The increased value so obtained will either command more 
labour, or pay the former quantity of labour better 



346 
347 



ib 



ib. 



348 
349 






SUMMARY. 457 

Though the quantity of money be not immediately in- 
creased, yet the whole produce will be estimated at a 
higher value . . . ... 349 

In general, however, a very favourable foreign trade leads 
to an importation of bullion from some quarter or other 350 

If the demand for foreign commodities increases, it does not 
follow that the demand for home commodities must pro- 
portionately diminish . . . . . ib. 

The demand for foreign and home commodities, taken to- 
gether, may be limited by the national revenue ; but the 
national revenue is at once increased by the increased 
profits of the foreign merchant, without a proportionate 
diminution of revenue in any other quarter . . 351 

When the increase of commodities derived from foreign 
commerce is not accompanied by an increase of value, a 
stagnation in the demand for labour is immediately per- 
ceptible, and the progress of wealth is checked . ib. 

It is not the same to the labourer whether wages rise, or 
provisions fall. In the first place he is sure of full em- 
ployment ; in the other case, he may probably be thrown 
out of work . . . . . ib, 

A great fall in the price of particular commodities is per- 
fectly compatible with a continued and great increase in 
the whole value, both of the commodities themselves and 
of the general produce .... 352 

Even in the cases where the whole value of the particular 
article diminishes, it does not follow that the value of the 
general produce will be diminished ; but if it be, either 
temporary or permanent distress will be felt . . 353 

The specific and immediate cause of a general briskness of 
demand is such a distribution of the produce, and such an 
adaptation of it to the tastes and wants of the society, as 
will give its money price an increased command of domes- 
tic and foreign labour .... 354 

The progress of the United States of America, and of this 
country from 1793 to 1814, and all the striking instances 
of a rapid increase of demand and wealth, will answer to 
thi s test . . . . . . ib. 

But no instance can be produced of a country engaged in a 
successful foreign commerce, and exhibiting an increasing 
plenty of commodities, where the value of the whole pro- 
duce estimated in domestic and foreign labour has been 
retrograde or stationary .... 355 

The natural tendency of foreign trade, as of all sorts of ex- 
changes, by which a distribution is effected, better suited 
to the wants of society, is immediately to increase the val- 
ue of that part of the national revenue which consists of 
Profits . . . . . . ib 

58 



458 SUMMARY. 



Page 



Mr. Ricardo considers foreign trade chiefly as the means of 
obtaining cheaper commodities ; but this is only looking 
to one half of its advantages, and probably ntrt the larger 
half . . . . . 35G 

We must estimate the advantages of the greatest part of 
our foreign commerce upon a different principle, namely, 
that of exchanging what is wanted less, for what is wanted 
more . . . . ... 357 

Foreign commerce therefore, and all extension of markets, 
must be considered as pre-eminently favourable to that 
increase of value which arises from distribution . . ib. 



Sect. IX. — Of the Distribution occasioned by unproductive Con- 
sumers, considered as the Means of increasing the exchangeable 
Value of the whole Produce. 

If, under a rapid conversion of unproductive into productive 
labour, the demand, compared with the supply of mate- 
rial products, would prematurely fail, it follows that a 
country with great powers of production must possess a 
body of unproductive consumers . . . 358 

In the fertility of the soil, the powers of machinery, and the 
motives to exertion, under a system of private property, 
nature has made a provision for leisure ; and if it be not 
accepted, the progress of wealth will be impeded rather 
than accelerated . . . . . ib. 

The most advantageous proportion of the unproductive to 
the productive classes cannot be determined. It will 
vary with the fertility of the soil and the ingenuity of the 
people . . . . ib. 

It will vary also with the different degrees of consumption 

which may prevail among the producers themselves . 359 
Capitalists, though they have the power of consuming all 
their profits, have seldom the will, as iris generally the 
great object of their lives to save a fortune . . ib. 

It is not true that the desire of consumption is commensu- 
rate with the power. Merchants and manufacturers, as a 
body, have such a tendency to save, that they could not, 
among themselves, find an adequate market for what they 
produce ... ... 360 

Without a sufficient number of other consumers to enable 
the merchant to realize his profits, he must either con- 
sume more himself, or produce less ; and if he adopt the 
latter course, the wealth of the country must necessarily 
suffer . . . ■ . . . ib 

Mr. Ricardo seems to consider saving as an end ; but in re- 
ference to national wealth, it can only be considered as a 



SUMMARY. 459 

means ; and a saving owing to cheap commodities has a 
totally different effect from a saving in consequence of 
high profits . . . ... 361 

National saving, considered as the means of increased pro- 
duction, must be limited by the amount which can be 
advantageously employed in supplying the actual demand 
for produce ib> 

1 he tendency to consume is powerfully counteracted by the 
love of indolence, and the desire to save in order to better 
our condition. Both capital and population may be re- 
dundant compared with the effective demand for produce 362 

It is true that wealth produces wants ; but it is a still a more 
important truth that wants produce wealth. The great- 
est difficulty in civilizing and enriching countries Is, to 
inspire them with wants .... 363 

The desire to realize a fortune, in order to provide for a 
family, is a powerful motive to exertion ; but the motive 
would not operate to the same extent, if, from the want 
of other consumers, the producers were obliged to con- 
sume nearly all that they produced themselves . . 364 

If the master producers have not the will greatly to in- 
crease their consumption, the labouring producers have 
not the power ; and further, no consumption, on the part 
§ of workmen alone, can give encouragement to the em- 
ployment of capital . . . . . ib. 

If each workman were to consume double, all poor land 
would be thrown out of cultivation, and the power and 
will to accumulate would soon come to a stop . . 365 

There is little danger, however, of the labouring classes 
consuming too much. Owing to the principle of popula- 
tion the tendencies are all the other way . . 365 

It might be desirable, on other accounts than with a view 
to wealth, that the labouring classes should not work so 
hard ; but as this could only be accomplished by a simul- 
taneous resolution among workmen, it cannot take place 366 

With the single exception of the effects to be expected 
from prudential habits, there is no chance of an in- 
creased consumption among the working classes ; and 
if there were, it is not the kind of consumption best 
calculated to encourage the employment of capital . 367 

When the demands of the landlords have been added to 
those of the productive classes, it appears from experi- 
ence that profits have often prematurely fallen . ib. 

But if the master producers have not the will to consume 
sufficiently, and the working producers have not the 
power, then, if the aid of the landlords be not found suf- 
ficient, the consumption required must take place among 
the unproductive labourers of Adam Smith . . 338 



460 SUMMARY, 

I'age 
Every country must necessarily have a body of unproduc- 
tive labourers ; but it is a most important practical ques- 
tion to determine, whether they detract from the wealth 
of a country, or encourage it • . . 36'j 

The solution of this question depends upon the solution of 
the greater questions, 1st. whether the motive to accumu- 
late may be checked from the want of demand, before 
it is checked by the difficulty of procuring food ; and 2dly„ 
whether such check is probable . . . ib. 

An attempt has been made to determine these tivo questions 
in different parts of the present work, and if the determi- 
nation be just, we may conclude that a body of unproduc- 
tive labourers is necessary as a stimulus to wealth . ib, 
Of the persons constituting the unproductive classes, those 
which are paid voluntarily will be considered in gene- 
ral as the most useful in exciting industry, and the least 
likely to be prejudicial by interfering with the costs of 
production ...... 370 

Those which are supported by taxes are equally useful 
with regard to distribution, but may be prejudicial by 
occasioning an increased cost of production, and em- 
barrassing commerce . . . » .371 
Taxation, though it may sometimes stimulate to wealth, is 
so dangerous an instrument of distribution, that it can 
never be recommended with this view ; yet, when a dif- 
ferent distribution of property has actually been effect- 
ed by it, the policy of a fresh change may be doubtful . 372 
If distribution be a necessary element of wealth it would 
be rash to affirm, that the abolition of a national debt 
must certainly increase wealth and employ the people . ib. 
If the powers of production in a well peopled country 
were tripled, the greatest difficulty would be the means 
of distribution ; and it would depend upon the circum* 
stance of proper means of distribution being found, 
whether the increased powers were a great good, or a 
great evil . . . . . . ib. 

It may be a question, whether, with the great powers of 
production possessed by this country, and with its actual 
division of property in land, the same stimulus could be 
given to the increase of wealth, without the distribution 
occasioned by a national debt . . . . 374 

Still there are serious evils belonging to a national debt. 
It is both a cumbersome and a dangerous instrument of 
distribution . . . . . . ib. 

On these accounts it might be desirable to diminish the debt, 
and discourage its growth in future ; but after being ac- 
customed to a great consumption, we cannot recede with- 
out passing through a period of great distress . . 375 



SUMMARY. 46 , 

If « sponge were applied to the national debt, tbe rest of "* 
the society instead of being richer, would be the poorer 
lor it. More labourers would be thrown out of em 
ployment, and more capital would emigrate „< 

The landlords would probably employ more menia'l s er '. 
"ants and this would be the best remedy that in the 
actual circumstances could be applied; buUhe structure 
of society would be greatly deteriorated by the chant to 
The profits of capitalists, notwithstanding their relief £" 3 ' 6 
taxation, would fall from the want of distribution and 1 
m and' and m a few years the whole produce wou.d £ re-' 

A country with 'land, labour, and capital, 'has certa'inlv H,,," 3 " 
power of recovering from this state of thing 'I ^ 
would have passed through a period of great %t"L 
■on; and finally a considerable^ body of unprodnX: 

resole: "^ ^ abS °' Utely "^ to «fl forth ^ 
The most desirable proportion between 'the product^' 3 " 
and unproductive classes is that which will give the ^ 
est exchangeable value to the national ^oduce and 

PrKoT 011 mU5t ^ aCC ° rd '^ * & Po-rstf 

. 378 

Sect X.— Application of some of the preceding Principle* in th, 

4 

The distresses of the labouring classes have been attributed 

P° red wUh r" al - , The Capita " ^ be deficient com- 
Pared, wt , 1* P°P" lat '?- and ^ not deficient com- 
Pared with the effective demand for it . , 7Q 

If one fourth of the capital of a country were suddenlJ 

destroyed, or transported to a different part of the world 

r P e q °uired 0U,d * ** a . nd SaV1 " g W ° uld be *?£?£ 

If, „°r D n h r 6 0ther , hand ; capital were diminished by' the fail- 
ure of some branches of trade which had former y been 

no7be r tbr rOUS '/ r0fi ' S W ° Uld be l0w ' a « d savingVou d 
not be the remedy required . " 

bUc?to th:? 1 :,"' at pres r * bears th; ne ™t ^ 

e 1 h?„ -, aUer Case - Its ca I ,ital has ooen diminish- 
' b . ut lts .revenoe and effective demand for produce 

uncertain" d,m ' mShed Sti " m ° re ' aDd P rofits •«• >« d 

. 381 



ib. 



380 






462 SUMMARY. 



Page 



But when profits are low, and capital is on that account 
flowing out of the country ; to encourage saving, is like 
the policy of encouraging marriage when the population 
is starving and emigrating • • 383 

Our present low profits have been attributed to the culti- 
vation of poor land, heavy taxation, and restrictions on 
commerce ; but it is difficult to admit a theory of our 
distresses inconsistent with the theory of our prosperi- 
ty ....••• lb * 

Whatever may be the final tendency of these causes ; yet 
as the country was more than usually prosperous when 
they prevailed in a greater degree than at present, we 
must look elsewhere for the immediate sources of the 
existing distress . . • • *"* 

A country surrounded by an impassable wall might expe- 
rience similar distress from a sudden diminution of de- 
mand and consumption, although there were no poor land, 
no taxes, nor any restrictions on trade . • l "» 

The state of Europe and America since the war is inexpli- 
cable upon the principles of those who think that the 
power of production is the only element of wealth . 385 
The transition from war to peace, as usually explained, 
will not account for so long a period of stagnation as has 
taken place since the war : but it may be accounted for, 
by supposing that the whole consumption compared 
with the supply has diminished . • • 386 

This diminished consumption must have operated very dif- 
ferently in different countries. Some it must have re- 
lieved, others it has distressed. Those which suffered 
the least by the war have suffered the most by the peace lb, 
The distress which has attended the peace is an unfortu- 
nate association ; but it should be recollected that it has 
arisen from peculiar circumstances, which in the same 
degree are not necessarily connected with the termina- 
tion of a war . . • • • j- 
On account of the evils likely to be felt from a sudden di- 
minution of consumption, the policy which has often 
been recommended of raising the supplies for a war 
within each year may fairly be doubted . • 388 
\lthough it is necessary to save, in order to recover the 
capital which the country has lost ; yet if profits are 
low and uncertain, saving is not the first step wanted . 389 
What the country wants is an increased national revenue, 
or an increase of the exchangeable value of the whole 
produce. When this has been attained we may save with 
effect . . • • • ' 39e 



SUMMARY. 463 

Page 

The question, how this increase of revenue is to be at- 
tained, has been attempted to be answered in the latter 
sections /jf this chapter .... 390 

An increased revenue is not so easily attained as an increas- 
ed proportion of capital to revenue . • .391 
Still it is of importance to know the immediate object to be 
aimed at, that, if we cannot forward it, we may not ve- 
,rd it • ■ ' ' * • 392 
A greater freedom might be given to commerce without 
diminishing the revenue of the customs. The permanent 
effects of opening the trade with France would certainly 
be beneficial ■ • ' " * * 3 ?3 
But in looking forward to changes of this Kind, we should 
attend to the caution given by Adam Smith, which would 
be particularly applicable to the silk trade • ib. 
When the opening of any trade would produce temporary 
distress, it is because it would diminish for a time tbe ex- 
changeable value of the whole produce ; but, in general, 
the extension of trade increases it 394 
A knowledge of the effects of unproductive consumers on 
national wealth will make us proceed with more caution 
in our efforts to diminish them * 395 
Public works, the making and repairing of roads, and a ten- 
dency among persons of fortune to improve their grounds, 
and keep more servants, are the most direct means within 
our power of restoring the demand for labour ■ * ib. 
When the national revenue has been increased, and the pro- 
fits of stock have been raised, we may then proceed with 
effect to recover our lost capital by saving * ' 396 
It is thought by many that the reyenue of the country would 
be most effectually increased, and the balance of consump- 
tion restored, by an abundant issue of paper ; but this 
opinion is founded on a mistaken view of the effects of a 
depreciated currency * * ' *'*, 
A great issue of paper now would have a very different effect 
from that which it had during the war. It would increase 
the glut of commodities, and in a short time aggravate the 
distresses of the capitalists, by reducing still farther the 
rate of profits •••••• 397 

The doctrine that the progress of wealth depends upon 
proportions may be objected to as rendering the science 
of Political Economy more uncertain ; but if t be found 
true, it is a sufficient answer to the objection ■ • 398 

Though no certain rule can be laid down for growing rich 
the fastest, yet if we attend to the great laws of demand 
and supply, we shall generally be directed into the right 
course • 
The market of national capital will be supplied without the 
aid of patriotism, and the whole question of saving may 



ib. 



4b4 SUMMARY. 

safely be left to the uninfluenced operation of individual 
interests and feelings • * * * 399 

Though the science of Political Economy must, from its 
nature, resemble more the science of morals or of politics 
than that of mathematics, yet if its principles be founded 
on a sufficiently extended experience, they will rarely in 
their application disappoint our just expectations • 400 

Another objection may be made, that the doctrines of the 
latter part of this work are favourable to taxation ; but 
this would not be a just inference * * ib. 

Even if we aUovv that taxes and expenditure may, under 
some circumsunces, increase wealth, yet if such wealth 
is only temporary, and when its progress stops is attended 
with distress, it would have been better that it had not 
existed • * ' * 40J 

It is the duty of governments to avoid war if possible ; but 
if itjb^ unavoidable, so to regulate the expenditure as to 
produce the least fluctuation of demand * 402 

Other classes are often relieved by the taking off of taxes ; 
but nothing can compensate to the labouring classes the 
want of demand for labour * |D * 

To state these facts is not to favour taxes, but to bring for- 
ward additional reasons against imposing them without a 
strong necessity * * * 4 ^ i> ' 

The labouring classes suffer more from low wages in adver- 
sity than they are benefited by high wages in prosperity. 
To them fluctuations are most unfavourable. The interests 
of the great mass of society require peace and equable ex- 
penditure ... ib. 



( 46." 



INDEX, 



Accumulation of capital, influence of, in 

raising rents, 127— accumulation, or the 

saving from revenue to add to capital, 

considered as a stimulus to the increase of 

wealth, 273— 291. 

Agriculture, influence of improvements in, 

on raising rents, 129, 130— and of an in- 

-1 to 8e *" the .P rice of agricultural produce, 

1-140— improvements in agriculture, 

i<& raC i t '- C o * S ° Urce of tUe increase of ren * s > 
lb A lb3— why such improvements are 

chiefly effected by the tenants, 171, 172- 
probable effects of J " : -dag l^we ;„ agri- 
culture, 205 — observations on spade-cujti- 
^•on. **• note, the distribution occasion- 
ed by the division of landed property, 
considered as a means of increasing the 
exchangeable value of the whole produce, 

33 .°.7; 341 "" H ' tate of agriculture during the 
middle ages, 331. 
Afterica, the United States of, almost the 
only country where rents may be increas- 
JJ Wi J5°"t agricultural improvements, 
165, 166 — their rapid increase accounted 
for, 331— causes of the distresses in those 
states since 1815, 385, 386. 

_ B. 

Bank paper, the value given to it, by limit 

1TVT it a ^-l****.**.?*.. -1 A 1 . il m 



others, t'A.— the use of fixed capital, in 
general favourable to the abundance of 
circulating capital, 204, 205— the profits 
of capital, what, 228— bow they are af- 
fected by the increasing difficulty of pro- 
curing the means of subsistence, 229— 
234— also by the proportion which capi- 
tal bears to labour, 235— 243— and by 
causes practically in operation, 243 — 
249— probable' effect of an abolition of 
public debt upon capitalists, 376, 377— 
deficient capital the cause of the distress- 
es of the labouring classes, since 1815, 
344, 345— this cause further considered 
and elucidated, 379. et seq.— injudicious 
policy of recommending the conversion 
of more revenue into capital, when pro- 
fits are low and uncertain; and when, in 
consequence of capitalists not knowing 
where they can safely employ their capi- 
tals, capital is flowing out of the country, 
383,384. 

Cattle pay rent, and in proportion to their 
qualities nearly an equal rent, 78 — their 
price is indirectly regulated by the cost 
of producing corn, 79. 

China, high rate of interest in, 124— cau6e 
of it, 125 

Circulating medium of a country, change 
in the value of, alters the distribution of 



ing it. quantity, shews that the cost of pro- > its produce, 346, 347. 

dllCM? Cold on v infWnfAo ;». n ^^ ^» U n:_ .:i V...^' , 1 



ducmg gold oniy iofluenees its price as it 
influences its supply, 61. 

British Empire, prosperous state of, 337, 
338 — its causes, ib. 339. 

Buchanan (Mr.), erroneous views of, on the 
nature of rent, 108, 109—117, 

Bullion : — an increase in the exchangeable 
va ue of the whole produce, estimated in 
bullion, and in the command of this bul- 
lion over foreign and domestic labour, ab- 
solutely necessary to extricate the coun- 
try from its distresses, 390—393—402. 

_ . C. 

Capital, absolute necessity of, to farmers, 156, 
W7 -fertility of land the only source of 
permanently high returns for capital, 
18^-stnkmg illustration of the effects of 
<apitals employed oa land compared with 

59 



Civil liberty produces prudential habits in 
the lower classes of society, 195. 

Comfort, standard of, various in different 
countries, 194. 

Commerce, internal and external, consider- 
ed as a means of increasing the ex- 
changeable value of produce, 341 — 357. 

Commodities, prices of, depend upon the 
causes which call forth, or render unne- 
cessary, a great or intense demand, 52— 
the prices of commodities, how influenc- 
ed by supply and demand, 51— 57— also 
by the cost of production, 57—64 — natu- 
ral and necessary prices of commodities, 
what, 66, 67— the prices of commodities 
further influenced by the labour which 
they have cost, 67— 86- and by the la- 
bour which they will command, 94—100 
—a mere exchange of commodities use- 



466 



INDEX. 



less, 342 — the actual value of them bow 
to be estimated, 322. 

Consumers (unproductive), difficulty of 
ascertaining what proportion of to the 
productive classes, is most favourable to 
the increase of wealth, 358 — the distribu 
tion occasioned by them considered as a 
means of increasing the exchangeable va 
lue of the whole produce, 359 — 379. 

Corn, on the value of, 100,101 — a mean 
between it and labour, considered as a 
measure of real value in exchange, 102— 
105- rise in the price of, raises rents, 129, 
130— fall in its price, terminating in alter- 
ing the value of the precious metals,lowers 
rent, 140 — on the dependence of the ac- 
tual quantity obtained from land, upon 
the existing rents and the existing pri 
ces, 143 — 150 — -difference between the 
price of corn and that of manufactures, 
with regard to natural or necessary price, 
144 — the price of corn, how influenced 
by a difference in the value of the pre- 
cious metals, 151 — and by the high com- 
parative cost of production, 152—155 — 
corn would not be cheaper, or more plen- 
tiful, if landlords were to give the whole 
of their rents to their tenants, 157, 158 
—influence of the importation of com, 
on the connection of the iuterests of the 
landlord, and of the state importing it, 
170 — 176 — influence of the cost of pro- 
ducing corn on the wages of labour, 187, 
188— prices of wheat in the 15th and 16th 
centuries, 210 — 212 — in the 17th centu- 
ry, 214-— in the 18th ceutury, 217— and 
in the former part of the 19th century, 
ib. — general observations on the prices 
of corn during the last five centuries, 218, 
226 — particularly as affected by the sea- 
son!, 221, 222. 

Cost of production, considered as it affects 
exchangeable value, 57 — 60 — the true 
way of viewing the costs of production, 
in their effects upon prices, is, as the ne 
cessary conditions of the supply of the 
objects wanted, 62, 63 — these conditions 
stated, 64, 65— the high comparative cost 
of production, how far a cause of the 
high comparative price of corn, 152— 
155. 

Cotton manufactures of Great Britain, 
causes of the increased demand for, 311, 
312. 

Cultivation doe3 uo' always proceed equal- 
ly with populat; », and why, 101 — in 
what manner the high comparative cost 
of. affects the price of corn, 152 — 155. 

Cultivator, on the necessary separation of 
the profits of, from the rent of land, 118 
—126. 

Currency, irregularities in, a temporary 
cause of high price that may mislead 
landlords in letting their lands to their 
own injury, and to the injury of the conn 
try, 159. 



D. 

Demand and Supply, these terms consider- 
ed, 50, 51 — the relation between ihem, 
how to be ascertained, 51 — demand and 
supply, considered as a measure oi value, 
52 — 57 — the principle of d» uid 

supply determines both natural prices 
and market prices, 59, 60 — influence of 
demand and supply, on the wages of la- 
bour, 187— 191— effective demand will 
command genera) wealth, 323 — 345. 

Distresses of the labouring classes since 
1815, caused by deficiency or !os& of capi- 
tal, 344— 345— 379— 390— the remedies 
for these distresses a^e. firs'., an increased 
national revenue, 390 — which c^n be ob- 
tained only by an union of tlu .i of 
distribution with the powers of produc- 
tion, 390— 393— 320— 329— and second- 
ly, an increase in ihe exchangeable value 
of the whole produce, es'imateu in bul- 
lion and in the eorrmaud of this hnllion 
over foreign and domestic labour, 390— 
393—402. 

Distribution, a union of tho means of, with 
the powers of introduction, necessary in 
order to ensure a continued increase of 
weoUh, 2_? f?jo ~~f ♦»><- uon 

occasioned by the division of I pro- 

perty, considered as a means of increas- 
ing' the exchangeable value of the whole 
produce, 330 — 341 — the distribution oc- 
casioned by commerce, internal and ex- 
ternal, considered as a means of increasing 
the exchangeable value of produce, S41 
— 357 — the distribution occasioned by 
unproductive consumers, considered as 
the means of increasing the value of the 
whole produce, 358—378. 

E. 

Economists, strictures on the differences be. 
tween, and Adam Smith, 2, 3— the com- 
parative merits of their systems and of 
that of Adam Smith, depend chiefly on 
their different definitions of wealth, 21— 
which term the Economists have confined 
within too narrow limits, ib. — the opinion 
of the Economists, that the term pro- 
ductive labour should be confined exclu- 
sively to labour employed upon land, 
considered and shewn to be errooeou3, 29, 
30 — erroneous views of the economists, 
respecting the unproductive nature of 
trade, 341, 242. See Political Economy. 

Education, influence of, on the condition of 
the labouring classes, 196. 

England, population of, why not increased 
in the same proportion as that of Ire- 
land, during the same period, 197, 226 — 
rales of wages there, in the 15th and 
16th centuries, with remarks thereon, 
207— 210— especially in the 16th centu- 
ry, 218, 219— prices of wheat there, in 
the 15th aud 16th centuries, 209, 210— 



INDEX. 



467 



in toe 17th century, 214— in the 18th 
century, 217— and in the Conner part of 
the 19th ceutury, 218— the different va- 
lues of silver in England and in Bengal, 
accounted for, 90. 
Exchange, of value in, 41 — nominal value 
in exchange, defined, 49— real value in 
exchange, t*6 — of demand and supply, as 
they afftct exchangeable value, 50—56 
— cost of production, as it affects ex 
changeable value, 56— 67— of the labour 
which a commodity has cost, considered 
as a measure of exchangeable value, 67— 
85— of the labour which a commodity 
will command, considered as a measure 
of real value in exchange, 94— 100— of a 
mean between corn and labour, consi 
dered as a measure of real value in ex- 
change, 100— 105— the exchangeable va- 
lue of a commodity ceases, where such 
commodity exists in a great excess above 
the wants of those who use it, 146, 147 
—the distribution occasioned by the divj 
sion of landed property, considered as a 
means of increasing the exchangeable va 
lue of the whole produce, 330— 340— the 
distribution occasioned by commerce con- 
sidered «>«• - 



I. 



~e 



fmpc tation of Corn, how it affects the pr?» 
of that commodity, 153, 154 — its iui 
ence on the connexion of the interests 
the landlord and of the state impor 
corn, 170, 176. 

Improvements in agriculture, influence 
on rent, 129, 130 — a maiu source of 
increase of rents, 162, 163 — the Uni 
States of America, almost the •** 
try where rents may be in' 
out agricultural improve 
— agricultural improve 
ed chiefly by the ter 
land owners, 171, 17*. 

Interest, rate of, in China, 124— cause oi 
the high rate of, there and in India, 125 
— rate of in England, during the reign of 
George IJ.,247 — reduction of it, account- 
ed for, 368, and also the reduction of in- 
terest in Italy, in 1685, ib. 

Interference. See Non-interference. 

Ireland, state of wages of labour, and o* 
profits of stock in, cannot' be reduced, 
and why, 164 — cause of the increase o 
its population, 131— 196, 226— thepow 
er of supporting labour exists there, to 
"r»**i ex.cnt than the will, 305, 306- 
"ter of t! ." *- ; "^ peasantry v 



* -~- 



Jb 



INDEX. 



affected by tbe introduction of fixed capi- 
', 206— how far the profits of capita] 
affected by tbe proportion, which ca- 
1 bears to labour, 234— 243— i oven- 
i to save labour considered as a sti 
» to the continued increase of wealth, 

rer, the wagos of, to be necessarily 
rated from the rent of land, 118— 
- ; '"- it- of the rate, at which the 
>e country and the demand 
creasing, upon the con- 
ring classes, 193— in- 
of people in respect 
ug, and lodging, on 
Mrtc condition, 193— 199— effect of a fall 
in the value of money, on the condition 
of the labourer, 207- . 21 7— difference be- 
tween the earnings of labourers in Poland 
and in America, 242— labourers are sti- 
mulated by the want of necessaries to 
produce luxuries, 294, 295— deficient ca- 
'ital, the cause of the distresses of la- 
ourers, since 1315, 344, 345— further 
ucidation of this subject, 379— 390— re 
edies for these distresses : first, an in- 
ensed national revenue, 390— thi* to be 
tained only by an union of the i»ewr- 
,; stribution '■ owers « 



Landlord, positive we. 
crease gradun , ?feM 

country towards a big iiprove- 

meot, 156- -investigation of tiie causes, 
which may mislead him in letting hit 
lands, to the injury of hiiatel 
country, 156-159. md ne- 

cessary connexion of the mteretU of 
landlord and of the state, in a country 
which supports its own po; 
1(>9~ and in countries which import corn. 
170- 175- probable effret of *n abolit 
of public debt upon 
Lauderdale (Lord), definition of wealth 

21— remarks on it. ib. 
Limitations and exceptions, why rejected 
by some scientific writers on \h 
economy, 6— the necessity of tbr / 
tr.ited, iu the doctrines laid down 
Adam Smith, respeci 'y and 

savintr, 7- -and in the rules which rel 
to the division of land, 7— refutation 
the opinior of some political economists 
that though etceptions may exi-t to » 
general rules o( political economy, j 
they need not be n« 1 0—12. 



1NDK 




, 299~cnuse* of its thin 
on, 293-f 1K1 ry produc- 

n maize, t/;.-. po- 
7 of li.e Mexican-, 2P9~-ob,taeles to 
t.»c progrese of population in this coun- 
• WO— want of demand, the chief 
eaoie of the slow progress of New Spain 
in wealth and population, compared with 
" B I us resom j- -304. 

•, wtien uniform in its cost, con 
i a measure of value, 86-~93~ the 
effect of a fall in the value of money, on 
.«*m;ind for labour and the condition 
of toe labourer, 207—217 



orial Debt, evils of a great one. 374— 
reasons why it should be slowly reduced, 
N»t not annihilated, 375, 376— probable 
effects of annihilating the pnl&c debt, 
f <6— particulai I- on.'ratidlora:., 377— and 
t usis, ib. 377,378. 
i. See M trice. 
■uterference, the principle of necessa- 
ry limited in practice ; }irst y by some 
jes connected with political economy, 
iich it is universally acknowledged be- 

ipr ♦• ! — Ji.. !„, 



o 



the thin population of some Darts 
New Spain accounted for, 298-obstacle* 
to the progress of population in thai 
country, 300, 
Potatoes, the culture of in Ireland a cause 
or the increased population of that 
island, 181, 196. 

Prices of commodities, how influenced by 
demand and supply, 51-56- by the cost 
of production, 57-66— by the labour, 
which a commodity has actually cost; 67 
—85 -and by the labour which it will 
command, 93~99~prices of commodi- 
ties how influenced by money, when 
uniform in its value, 86-93— natural or 
necessary price, what, 66, 67~the cause* 
of the excess of the price of raw pro- 
duce s>]doye the costs if. -production, 110 
~il 7— the dependence of the actual 
quantity of produce obtained from the 
a .^P° Q n ^e eating price, illustrated, 
L a tem P or a»y rwe of prices, 
not sufficient to warrant an increase aP 
rent 157-rent ought always to be a lit- 
tie behind nrices, ib. 158 -the natural 
price of labour, what, 192— and what 
the market price, ib. 193—prices of 
"heat in the 15th and 16th centurier, 
***" 17th c—ttwy, 214 
'n the 



4*70 



INDEX. 




Production, cost of, considered as it affects 
exchangeable value, 57 — 60— is subordi- 
nate to tbe relatiou of the supply to the 
demand, 57— 62— the true way of consi- 
dering the cost of production, 62—66 — 
in what respects the high comparative 
cost of production is a cause of tbe high 
comparative price of corn, 152.. .155... 
the value of the whole produce of a 
country how to be estimated, 206, 207... 
facilities of production promote the open- 
ing of markets, 319.. .an union of tbe 
powers of production with the means of 
distribution, necessary, in order to ensure 
a continued increase of wealth, 320... 330 
...and to remove the present distresses of 
the labouring classes 390. .392. 

Productive caduyn;. r'jfined, 30 ..exc?mina 
tion of Adam Smith's definition of it, Zl^ 
...30. 

Profits of tbe cultivator, on the necessary 
separation of, from the rent of land, 118 
...126. .refutation of the error, that when 
land is successively thrown out of culti 
vation, the rate of profits will be high in 
proportion to the superior natural fertili- 
ty of the land, which will then be least 
fertile in cultivation, 148, 149. 

Profits of capital,defineH *"° * 

ner thr 

F 



pendente of the actual quantity of pro' 
duce obtained from the land, upon thr 
existing rents and the pyisting prices, 143 
...149.. prospect of exorbitant rent, from 
a competition of farmers, in what re 
a cause of injury to landlords and to the 
country, 156 — cautions to there in rais- 
ing their rents, 157... 159. .improvement* 
iu agriculture, a main source of the rise 
of rent?, 162... 165. 

Resources of a country cannot be altered 
by humanity, 192. 

Restrictions on the importation of corn, ef- 
fect of, 174. .175. 

Revenue, saving from, to add to the capi» 
taJ, considered as a stimulus to tbe in- 
crease of wealth, 273...290...ao increased 
national revenue wanted to extricate tins 
country from its present distresses, 390... 
an union" ,f>f the means of distribution 
with the powers or^nroductioa is abso- 
lutely necessary for this purpose, Ji^O... 
329. 390.. 392, 

Ricardo (Mr.), character of his princij. 
of political economy, 18, 168, note.] 
observations on his opinion on the inl 
ence of demand and supply op nrices, I 



oi the country - 

lakto piace, 164, 155. 
Soil, quality of, how far a primary «u* tf, 

the high pnceof raw produce, 110.. 1 i£ 
Spade-cultivation, observations on, Wi>, 

StSjntererti of, strictly and necessarily 
connected with those of the landlord, in 
a country which supports its own popula- 
tion, 160. I69...and in countries which 
import corn, 170.. 176. 

Stock, defined, 228. i4„„fnro. 

Subsistence, the increasing difficulty o pro- 
curing the means of, how it affects profits, 

22o...2»i4. _:*u:« th» 

Supplies, impolicy of raising "^ the . 

year, 388...389...See Demand and *up- 

Su^us produce of land, general remarks 
on, 170- .186. 

Taxation, heavy, whether bwjjf**? al 
country or not, considered, 384, 3»&«. 
impolicy of raising «W»»«~ | *£' 
within the year, 388, 389. ,.e necu ui i** 
ation, 402.. .evils of taxes, 402, 403. 

Transition from war to peace, effects oi, 
385, 386. 

stated, 32,. ^r^^H^ Ko- 



Us. J . 

conditio 

distinction oev»» ...... . 

stated, 262.. 266...the distnno 

Moned by the division of landed p». 

tv, considered as the means of increau.. 

the exchangeable value of the whole pre 
dace, 330...340...the distribution occa- 
sioned by commerce, considered as the 
means of increasing the exchangeable va- 
Tue of produce, 340...357...the dunnfao- 
tion occasioned by unproductive consu- 
mers, considered as a roeaus of mere ^ 
ins the exchangeable value of the whole 
produce, 358...378...an increase >* the 
exchangeable value of the wK.le pro- 
dice, absolutely necessary to extricate 
this country from its present distresses, 
390, 393... 402. 



W. 

Wages of labour, defined, 187.*.on the n«- 
l 6 —r>~>a nn of the wages of the 



ages oi laouui, uciiu..", »« ".v. 

c Lary separation of the wages of the 
labourer from the rent of land, 118„._ 
l26.,.illustration9 of the dependence, of 
the wages of labour on demand and sup- 
nlv 187... 191. .influence of high wages 
Sn population, 202... rates of wages in 
the 15th and 16th centuries, with re- 
marks thereon, 207, 209 .especially on 
the high rate of wages in the lt,th •entu- 
ry "18 220...rates of wages in France, 

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